By Helen Reid

LONDON (Reuters) -Burberry will use its British heritage appeal to win back customers by focusing on trench coats and scarves and be less ambitious with prices on bags and shoes, the loss-making luxury brand said in a revamp that sent its shares up sharply.

New CEO Joshua Schulman laid out his turnaround plan on Thursday after Burberry reported a loss for the first half of its financial year and announced a 40 million pound ($50.67 million) cost savings programme.

The group's shares leapt 20%, putting them on course for their biggest one-day gain ever as investors welcomed the strategy shift. Burberry shares are down 38% so far in 2024, including Thursday's rally.

"We took pricing too high across the board," Schulman told investors and analysts, setting out his assessment of what went wrong at Burberry. "We created new brand codes... that were not familiar or recognisable for our customers."

Looking ahead, he said Burberry would be "incredibly disciplined" with its brand and market itself as timeless British luxury. Its recent campaigns have focused on outerwear and scarves and featured British celebrities including model Cara Delevingne, rapper Little Simz, and actor Olivia Colman.

"We expect significant changes in the areas of product design, assortment, merchandising, pricing architecture, distribution, and communication," Citi analyst Thomas Chauvet said in a note, adding he sees the company putting more emphasis on its own stores and online sales as opposed to wholesale and outlets.

Burberry, like other luxury goods companies, has been hit by consumers' fading appetite for luxury in China and elsewhere, but it has lagged in the industry-wide slowdown.

Schulman, previously CEO at Coach and Michael Kors, is Burberry's fourth CEO in a decade, and the brand has also had three creative directors in the last seven years, each bringing new styles and logos.

PRICING STRATEGY SHIFT

Schulman told reporters Burberry would add more lower-priced "entry-level" products to its range as part of a pricing shift. Burberry has the most pricing power in outerwear, while it has less in handbags, he said.

"It is only in the recent 18 to 24 months that we really were trying to stretch our pricing on absolutely every product," Schulman said, adding that he sees opportunities in handbags priced under 2,000 euros ($2,109.00), with a "sweet spot" at 1,600 euros.

But he said Burberry's positioning would remain in luxury and there were no plans to make it an "accessible" luxury brand.