Burberry Group PLC, which has been in the crosshairs for burning tens of millions of dollars of its products, is far from the only firm to destroy unsold goods to maintain the exclusivity and luxury mystique of their brands.
In its annual report the British fashion firm acknowledged that it had burned unsold clothes, accessories and perfume worth ￡28.6 million (US$37 million).
More than one-third of the products destroyed were perfumes, which the company said was due to the rupture of its license with US fragrances manufacturer Coty Inc.
Since Thursday, when that piece of information buried in its 200-page report came to light, Burberry has come under scrutiny on social and news media for the practice.
However, industry experts say Burberry is far from alone.
“It is a widespread practice in the fashion industry, it’s commonplace,” said Arnaud Cadart, a portfolio manager at Flornoy & Associates who has previously followed the luxury industry as an analyst.
He said very few luxury brands hold sales to get rid of stock and instead destroy unsold products. Fashion items with short cycles increases the amount of leftover stock and items destroyed.
“Once you do some private sales to employees and journalists, it’s dumping,” he said.
Burberry on Thursday said it had measures in place to minimize its amount of excess stock, that it takes its environmental obligations seriously and harnesses the energy from burning the items.
“On the occasions when disposal of products is necessary, we do so in a responsible manner and we continue to seek ways to reduce and revalue our waste,” the firm said.
The destruction of goods is reflected in financial accounts, but in a manner “difficult to comprehend, often under an entry ‘impairment of inventories,’” Cadart said.
French luxury giant LVMH Moet Hennessy Louis Vuitton SE said in its latest annual report that “provisions for impairment of inventories are ... generally required because of product obsolescence [end of season or collection or expiration date approaching] or lack of sales prospects.”
Hermes International SCA’s annual report also spoke of product “obsolescence,” notably finished seasons or collections.
“Yes, there is a moral, ethical question as well as protecting the environment, but from a legal point of view, the brands are destroying genuine products which they own, products that are at the end of their life or the season, and they can do what what they want” with them,” said Boriana Guimberteau, a specialist on intellectual property law with law firm FTPA.
Guimberteau said a tenet of maintaining brand image is that exclusive products should be sold in exclusive distribution networks and that markets should not be flooded with end-of-season products.
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