British luxury brand Burberry (BRBY.L) announced significant changes on Monday, including the dismissal of its CEO and the appointment of Joshua Schulman, former CEO of Coach, to lead the company.
This move comes as Burberry aims to revert to its traditional style and enhance its positioning in the luxury market.
The company also issued a profit warning and canceled its dividend payout, causing its shares to plummet to their lowest levels in more than a decade. Burberry’s sales have been severely impacted by a downturn in the luxury sector, exacerbated by a strategy shift that failed to resonate with customers who prefer the classic trench coats and accessories for which the brand is renowned.
In the fiscal quarter ending June 29, Burberry reported a staggering 21% decline in underlying sales. Based on current trends, the company anticipates an operating loss for the first half of the year and expects to miss its annual profit targets. Consequently, Burberry has decided to forgo dividends this year to focus on revitalizing growth initiatives.
The company’s stock fell sharply by 17% to 738 pence, reaching levels last seen in 2010, reflecting investor concerns over its performance amidst ongoing challenges.
Joshua Schulman, who previously held leadership roles at Michael Kors and Coach, will become Burberry’s fourth CEO in a decade, succeeding Jonathan Akeroyd. His appointment signals continuity in Burberry’s ambition to elevate its brand in the luxury segment, despite recent setbacks.
Gerry Murphy, Burberry’s chairman, assured stakeholders that the brand’s core identity would remain intact under Schulman’s leadership, emphasizing a subtle adjustment rather than a complete strategic overhaul. Murphy clarified that Burberry’s aim to appeal to higher-end luxury consumers remains unchanged, acknowledging the resilience of this market segment amid economic uncertainties.
Analysts have speculated about potential strategic shifts at Burberry, noting investor dissatisfaction with its recent performance. Deutsche Bank analysts, while maintaining a hold rating on Burberry’s stock with a target price of 800 pence, anticipate gradual changes in the company’s direction over time.
In response to cost pressures, Burberry may implement job cuts primarily in its UK corporate division as part of its cost-saving measures. CFO Kate Ferry indicated that several hundred roles could be affected, although specific details were not disclosed.
Overall, Burberry faces significant challenges as it navigates a competitive and evolving luxury market landscape, striving to regain investor confidence and reinvigorate its brand appeal under new leadership.