Pedestrians walk past a Burberry Group Plc store (left) within the Causeway Bay shopping district in Hong Kong.
Xaume Olleros | Bloomberg |
Shares in Burberry plunged over 15% in early trading on Monday after a disappointing first-quarter performance led the corporate to issue a profit warning, replace its CEO and cut its dividend.
The 168-year-old British luxury giant said that if the recent trade slowdown continues, it expects to post an operating loss for the primary half of this yr and an operating profit for the total yr that might be below current expectations.
The company also suspended its dividend and appointed Joshua Schulman – who previously led Michael Kors and Coach – as its latest CEO. Jonathan Akeroyd is stepping down “effective immediately by mutual agreement with the board of directors,” the corporate added.
At 9:54 a.m. London time, the share price was 15.4 percent lower.
“The weakness we highlighted at the start of fiscal 2025 has intensified and if the current trend continues into the second quarter, we expect an operating loss for the first half of the year,” Burberry Chief Executive Gerry Murphy said in a trading update, calling the corporate’s first-quarter performance “disappointing.”
“In view of the current business development, we have decided to suspend dividend payments for the 2025 financial year. We expect that the measures we have taken, including cost savings, will lead to an improvement as early as the second half of the year, strengthen our competitive position and underpin long-term growth.”
Burberry said comparable sales fell 21% within the 12 weeks to June 29. Retail sales through the period totalled £458 million. Regionally, sales fell 16% in EMEIA (Europe, Middle East, India and Africa) and 23% in Asia Pacific and the Americas.
RBC analysts Piral Dadhania and Richard Chamberlain said the outcomes were “gradually worse than the FY24 forecast that had already been lowered (in January).”
“Current trading trends indicate weak brand momentum at Burberry and we believe this needs to be addressed quickly to help Burberry contain further market share losses,” they added.
The company is scuffling with dwindling demand for luxury goods in its key markets, a cost-of-living crisis affecting its European and U.S. customers, and economic concerns plaguing Asian consumers.
“We are operating against a backdrop of weakening demand for luxury goods, with macroeconomic uncertainty affecting all key regions and contributing to the slowdown in the sector,” Burberry added.
The company justified its desire to “reconnect with its core customers” and announced that it could give attention to re-orientating its products “to include a broader range of everyday luxury goods”, refining its brand communications, updating its website and achieving cost savings.
The company, known for its trench coats, bags and the “Burberry check”, has been attempting to make its brand more premium for several years.
Akeroyd, who previously worked at Versace and Alexander McQueen, took up the challenge in 2021, succeeding his predecessor Marco Gobbetti, who put in place a five-year turnaround plan in 2017.
