Burberry’s shares plummeted over 15% in early trading on Monday following a disappointing first-quarter performance that led the company to issue a profit warning, replace its CEO, and suspend its dividend.
The British luxury giant, which has been in operation for 168 years, announced that if the current trading slowdown persists, it anticipates reporting an operating loss for the first half of this year and a full-year operating profit below the current consensus. The company also named Joshua Schulman as the new CEO, succeeding Jonathan Akeroyd, who stepped down by mutual agreement with the board. Schulman will assume his role on July 17, 2024, based at Burberry’s London headquarters, leading the executive committee and reporting to the board of directors.
Schulman, an American, has previously held prominent positions, including CEO of Michael Kors and Coach, president of Bergdorf Goodman at Neiman Marcus Group, and CEO of Jimmy Choo. He has also served in executive roles at Yves Saint Laurent and Gucci.
Chair Gerry Murphy described the company’s first-quarter performance as disappointing and noted that if the current trend continues into the second quarter, an operating loss is expected for the first half. Due to current trading conditions, Burberry has suspended dividend payments for the fiscal year 2025. Murphy expressed hope that cost-saving actions would improve the company’s second-half performance and strengthen its competitive position for long-term growth.
In the 12 weeks leading up to June 29, Burberry reported a 21% decline in comparable store sales, with retail revenue amounting to around $594.9 million. Sales decreased by 16% in EMEIA (Europe, the Middle East, India, and Africa) and by 23% in both Asia Pacific and the Americas. RBC analysts Piral Dadhania and Richard Chamberlain indicated that the results were worse than the already lowered guidance for fiscal year 2024. They emphasized the need to address soft brand momentum to prevent further market share losses.
Burberry has been facing challenges with reduced luxury demand across its major markets, influenced by a cost-of-living crisis affecting European and U.S. customers and economic concerns in Asia. The company acknowledged the impact of macroeconomic uncertainty on luxury demand and expressed a commitment to reconnect with its core customer base. Plans include rebalancing its product range to offer more everyday luxury items, refining brand communications, refreshing its website, and implementing cost savings.
Famous for its trench coats, bags, and iconic Burberry check, the company has been striving to elevate its brand image. Akeroyd, who previously worked at Versace and Alexander McQueen, took on the role in 2021, succeeding Marco Gobbetti, who initiated a five-year turnaround plan in 2017.
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