British luxury group Burberry on Monday fired its CEO and appointed former Coach boss Joshua Schulman to replace him, as it promises a “more familiar” look and continues efforts to revive the brand as it grows in the market.
The company also announced profit and cut its dividend, sending the stock to its lowest level in more than a decade.
A slowdown in the luxury sector has hit the 168-year-old brand harder than rivals, as customers were largely unimpressed by a style shift aimed at expanding beyond classic coats and accessories and commanding higher prices.
For the 13 weeks to June 29, underlying sales fell 21%. On current trends, Burberry would report an operating loss for the first half and miss annual profit forecasts, he said, prompting it to scrap this year’s dividend to invest in growth.
Shares of Burberry, which has been the worst performer among luxury stocks over the past five years, fell 17% to $9.86, trading at levels seen last in 2010.
The business has been on a protracted turnaround.
Schulman, who was CEO of US brand Michael Kors from 2021-2022 and previously chief executive and brand president at Coach, will be Burberry’s fourth CEO in 10 years.
He takes over on Wednesday from Jonathan Akeroyd, who has been in the job for two years.
Burberry has had three designers over the past decade. Daniel Lee in 2022 replaced Riccardo Tisci who left after less than five years.
Known for English upper class clothing with its classic camel print, red and black check, Burberry said its new offering would be “more familiar” to its core customers.
Group chairman Gerry Murphy told reporters that Lee was staying with the company and the new CEO would not abandon efforts to take the company to the higher end of luxury, which has been resilient in the face of reduced discretionary spending.
“Josh’s appointment does not signal a repositioning of Burberry’s ambitions,” Murphy said, when asked if Burberry could become a UK version of his former employer Coach, an American brand known for accessible luxury.
“It’s much more about a brainstorm and adjustment than a fundamental change of strategy,” Murphy said.
The company first raised the issue of the need to return to its classic designs after a sharp drop in sales in May, when stores showed Lee’s collection of bolder and more expensive runway fashions.
Only the high end of the luxury sector has withstood the impact of inflation and the economic slowdown, along with the property crisis and record youth unemployment in the potentially huge Chinese market.
Adding to investor concern over slowing Chinese demand, Swatch Group, the world’s biggest watchmaker, reported a sharp drop in first-half sales and profits on Monday.
Burberry has the weakest PE ratio in the luxury sector, which is widely used in financial markets to gauge the relative value of stocks.
It stands at 16 times forward earnings over the next 12 months compared with 22 for other global luxury stocks.
At the same time, Burberry’s warning on Monday knocked confidence among its peers. European luxury groups Hermes and LVMH both traded up more than 1%.
Analysts predicted that Burberry would change its strategy more than it has admitted so far.
“Investors were becoming increasingly frustrated with the performance at Burberry and were looking for a change in strategic direction. We expect this to start as a gentle reversal, but will evolve into a larger shift over time,” Deutsche Bank analysts said in a note.
The bank has a hold rating on the stock and a price target of 800 pence.
Asked about the reported job cuts, CFO Kate Ferry said the company would seek cost savings and several hundred roles could be cut, mostly in its UK corporate division, but she could not comment further. further.