(qlmbusinessnews.com Tues. 16th July, 2024) London, UK —
“Burberry Restructures: Sales Drop and Leadership Change”
Luxury fashion house Burberry has announced a change in leadership as it grapples with declining sales. Joshua Schulman, previously head of the US brand Michael Kors, will take the helm as the new CEO, replacing Jonathan Akeroyd, who departs with immediate effect.
This leadership shakeup comes in response to a sharp drop in sales, largely due to reduced demand for luxury goods, particularly in China. The company has also hinted at potential job cuts and has warned that if current trends persist, its profits will fall short of expectations.
Burberry, renowned for its iconic camel, red, and black check pattern, reported a 21% decline in retail revenues for the quarter ending 29 June. Chairman Gerry Murphy described the results as “disappointing” and noted that the luxury market is “more challenging than anticipated.”
Akeroyd had attempted to elevate Burberry's market position, but Murphy stated that the brand would now “take decisive action to rebalance our offer to be more familiar to Burberry's core customers whilst delivering relevant newness.”
Catherine Shuttleworth, head of marketing agency Savvy, commented that Burberry's push further into the luxury market had alienated many of its core consumers, effectively pricing them out of the brand. She welcomed the plan to refocus on everyday luxury.
Schulman, who also led Jimmy Choo in London from 2007 to 2012, will be Burberry's fourth CEO in a decade. His predecessor, Akeroyd, served for two years. To conserve cash, Burberry is suspending dividend payments to shareholders for the current financial year.
Murphy stated that the measures being implemented, including cost reductions, would enhance the company's performance in the latter half of the year. Earlier reports suggested that hundreds of jobs could be at risk.
Chief Financial Officer Kate Ferry, while unable to comment on specific job losses due to an ongoing consultation, indicated that a few hundred roles, primarily in the UK corporate division, could be affected.
Burberry's sales have been hampered by weaker demand for luxury items, with significant declines in trading in China and the Americas. The company reported a 23% decrease in sales in the Asia Pacific region and a 21% drop in mainland China. Sales in the Americas also fell by 23%.
In May, Burberry announced a 40% decline in full-year profits. The brand is not alone in facing these challenges; in March, luxury goods company Kering issued a profit warning following a slump in demand for its Gucci brand in China.
Pauline Brown, former head of LVMH North America, explained that changing consumer attitudes in China are impacting mid-range brands particularly hard. She noted that as markets mature, consumer preferences evolve, affecting how wealth is displayed.
“Quieter” brands like Hermes and those catering to the ultra-wealthy, such as Chanel and Montclair, are better positioned to withstand the downturn compared to more visible brands like Gucci and aspirational ones like Coach or Burberry.
Murphy expressed his confidence in Schulman's appointment, describing him as a “proven leader with an outstanding record of building global luxury brands and driving profitable growth.” Schulman stated he was “deeply honoured” to lead Burberry, praising it as an “extraordinary luxury brand, quintessentially British, equal parts heritage and innovation.”
Burberry's shares have plummeted by over half in the past year, with an additional 17% drop on Monday. Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented on the challenges faced by luxury brands relying on aspirational shoppers, noting the pressures of high interest rates and an uncertain economic climate. She suggested that the brand would return to its core principles and focus on dressing the elite.
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