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Burberry to Buy its Leather Supplier in Aim for Greater Supply Chain Control

As competition in the marketplace heats up and supply chains take a front seat for the first time, brands are making moves to have better command of their sourcing and product development.

For Burberry, the focus is on its leather supply chain.

The luxury brand said Monday that it has entered into a strategic agreement to acquire a luxury-leather goods business from long-term Italian supplier partner CF&P. The more intimate relationship with its leather product development is expected to not only allow Burberry to upscale the quality of its products, but likely improve margins too.

“This acquisition is a major milestone for us and a statement of our ambition in this strategically important category,” Burberry CEO Marco Gobbetti said in a statement. “It will create a center of excellence for Burberry’s leather goods, covering all activities from prototyping, product innovation, engineering and the coordination of production. This will give us greater control over quality, cost, delivery and sustainability of our leather goods.”

As part of the transaction, CF&P employees, including expert craftspeople who have worked with the Burberry brand for more than a decade, will become Burberry staff once the acquisition is completed, which is expected later this year.

Further terms of the deal were not disclosed.

Burberry has been on a mission to “re-energize” its product as part of its transformation, moving from what’s long been a focus on its traditional check to other high-end options for its range of leather goods. The efforts are expected to pay off on the bottom line.

For the three months ended Dec. 31, comparable store sales at Burberry were up 2 percent, with Asia Pacific and China seeing the greatest growth. In the U.S. market, sales were “broadly flat.” In its guidance for fiscal year 2018, Burberry said it continues to expect margin improvement and to remain “strongly” cash generative.

“We are building on strong foundations and are fully focused on the successful delivery of our multi-year plan to position Burberry firmly in luxury and deliver long-term sustainable value,” Gobbetti said in the January statement. Preliminary results for the quarter ended March 31 are expected out Wednesday.

To further its transformation efforts, Burberry in March tapped Riccardo Tisci—who spent 12 years as head of creative for Givenchy—as its chief creative officer. Tisci will present his first collection for the brand this September.

Burberry’s move to bring its leather supplier in house comes on the heels of other luxury leaders making similar moves to sure up their supply chains and product offerings.

Last month, Gucci officially inaugurated its ArtLab, a craftsmanship and innovation center that opened earlier this year just outside of Florence and close to its headquarters. The new space will serve as the innovation hub for the design and creation of Gucci leather goods and footwear.

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