Burberry has warned again on profits and ousted its chief executive, as the struggling British luxury fashion brand announced a change of direction to “reconnect” with core customers.
In an unscheduled trading update on Monday, Burberry said Jonathan Akeroyd was leaving the company with immediate effect and “by mutual agreement with the board”. It comes less than three years after the former Versace boss was appointed in 2021.
Burberry has parachuted in a former chief executive of the US fashion brand Coach, Joshua Schulman, to the top role to replace Akeroyd and revealed a list of “immediate actions” needed to reverse the company’s fortunes after issuing its second profit warning this year.
It follows a double-digit decline in sales across its core markets in what the company described as a “disappointing” first quarter. Store sales in the Americas and Asia Pacific tumbled 23%, while sales in Europe, the Middle East, India and Africa dropped 16%.
Burberry’s London-listed shares plunged 15% after the gloomy statement on Monday morning, making it the top faller on the FTSE 100. The company also announced it was suspending shareholder dividend payouts.
The fashion brand said that under Schulman’s leadership it would focus on “more of the timeless, classic attributes that Burberry is known for”. That will include an outerwear campaign to be launched globally in October, “building on the established resilience of our house icons”.
“We believe there is an opportunity to reconnect with our core customer base and capitalise on the enduring appeal of Burberry’s iconic products and brand while delivering relevant newness,” the company said.
The brand’s chair, Gerry Murphy, said that would mean shifting focus back on to products that have historically been key to the brand’s growth, including its trench coats and scarves, known for the distinctive Burberry check pattern.
Burberry has been suffering amid a slowdown in demand for luxury goods, which also hit the sales of rivals including Kering, which owns brands including Gucci and Balenciaga, and Mulberry earlier this year. However, Burberry’s failure to revive sales has clearly caused concern among board members, including Murphy who called the first-quarter results “disappointing”.
“We moved quickly with our creative transition in a luxury market that is proving more challenging than expected,” he said. “If the current trend persists through our Q2, we expect to report an operating loss for our first half.”
Murphy added: “We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth.”
Bosses confirmed on a press call that those actions would result in “a few hundred” job cuts, primarily in its UK corporate office, and that consultations were already under way. It will also mean working to improve online sales with a website revamp next month.
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Murphy pushed back against claims that Burberry’s strategy now appeared “incoherent”, arguing: “The strategy has been quite coherent for a while.”
“With the benefit of hindsight, in a weak market we perhaps went a bit too far, too fast with the creative transition, at a time when customers are feeling a bit more challenged, [and] a bit more conservative,” he told journalists, explaining that shoppers seemed less willing to try new items that came with high price tags.
“We’ve recognised that by saying, look: we’ve got to re-establish the prominence of our core offer … products that are timeless classics familiar to Burberry’s customers.”
He said the board had not had any “serious discussions” about replacing the chief executive until very recently, and had already been speaking to Schulman, who is also a former director of the British luxury paint company Farrow & Ball, about taking a potential role on its board.
As for its outgoing boss, Murphy said Akeroyd was “popular and very well liked, and respected here by everybody, including the board. But sometimes, things don’t work as planned and you have to change your plans, and that’s what we’ve agreed with Jonathan and that’s really all I want to say about it.”