Burberry heads further upmarket under new boss Gobbetti

Marco Gobbetti, who became Burberry's chief executive in July, said the brand needed to be entrenched "firmly in luxury enabling us to deliver sustainable long-term value".

Unveiling first-half results, Gobbetti pledged to liven up and increase Burberry's clothing, create luxury leather goods and accessories and revamp stores to make them more appealing.

Gobbetti, who joined from French luxury brand Celine, said: "By re-energising our product and customer experience to establish our position firmly in luxury, we will play in the most rewarding, enduring segment of the market. This will enable us to drive sustainable growth and higher margins over time."

Same-store sales rose 4% for the six months to the end of September, pushing revenues up to £1.26bn. Adjusted operating profit increased 28% to £185m, beating analysts' average forecast of £167m.

But Burberry shares fell 12% to 229p at 08:25 GMT and were the biggest losers in the FTSE 100 as investors digested Gobbetti's strategy. He wants to take Burberry out of US stores where its products sit alongside less desirable goods to enhance their luxury credentials but the move will hit revenues for two years.

Steve Clayton, who manages Hargreaves Lansdown's select UK growth shares fund, said investors were struggling to come to come to terms with a plan that could give Burberry the pricing power enjoyed by ultra-luxury brands.

"The real focus today is on new CEO Marco Gobbetti’s announcement of a drive to push the brand ever deeper into luxury territory. The market is now being asked to back him in a 'no pain, no gain' strategy shift. Early evidence suggests Mr Gobbetti has not carried the crowd with him."

Gobbetti set out his stall a week after Burberry announced the departure next year of Bailey, his predecessor as chief executive who joined as design director in 2001. The new boss's strategy could come as a surprise to investors who have been asked to approve multimillion-pound payouts to reward Bailey for turning Burberry into a luxury fashion brand.

Bailey became Burberry's chief executive in 2014 with no experience of running a public company. He came under pressure as sales flagged in China, which had become Burberry's key market, and he gave way to Gobbetti, a veteran fashion executive.