Fashion brand Burberry has changed its boss in a bid to revive itself in the face of plunging sales. The company said Joshua Schulman, the former head of US brand Michael Kors, will take over as chief executive, replacing Jonathan Akeroyd who is leaving Burberry “with immediate effect”.
The change of leadership came as Burberry reported a sharp fall in sales, as it continued to be hit by a downturn in demand for luxury goods, particularly in China. The company said it was looking at cutting jobs and that if current trends continue its profits will be below expectations.
Burberry – famed for its distinctive camel, red and black check pattern – said retail revenues fell by 21% in the three months to 29 June. Chairman Gerry Murphy called the figures “disappointing”with the luxury market “proving more challenging than expected”.
Mr Akeroyd had attempted to move Burberry more upmarket, but Mr Murphy said the brand was now “taking 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, said the attempt to move “further up the luxury market has alienated many of their core consumers who have in effect been priced out of the brand”.
“Burberry has lost some focus on who its customer really is and the statement today that they will refocus the brand back to everyday luxury will be welcomed,” she added.
Mr Schulman, who was also head of Jimmy Choo in London between 2007 and 2012, becomes Burberry's fourth chief executive in 10 years. His predecessor, Mr Akeroyd, had been in the job for two years.
Burberry is suspending dividend payments to shareholders for the current financial year as it looks to save cash. Mr Murphy said the actions being taken, including cutting costs, would improve the company's performance in the second half of the year.
Earlier this month, reports said hundreds of jobs at the company could be cut.
On Monday, Burberry's chief financial officer, Kate Ferry, said she could not comment on job losses as a consultation process was under way, but added that a few hundred roles could be at risk, mostly in its UK corporate division.
Burberry's sales have been struggling amid weaker demand for luxury goods, with trading in China and the Americas seeing some of the biggest falls. In its latest update, Burberry said sales in the Asia Pacific region were down 23% from a year earlier with sales in mainland China falling 21%. Sales in the Americas also dropped by 23%.
In May this year, the company had announced a 40% fall in full-year profits. Burberry is not the only luxury brand to suffer from the downturn. In March, luxury goods company Kering issued a profit warning after it said demand for its Gucci brand had slumped in China.
Pauline Brown, former boss of the luxury group LVMH for North America, said a change in consumer attitudes in China was affecting sales of mid-range brands particularly.
“We see that happening in every market that transitions from an emerging market to a more mature one. Tastes evolve and people's interest in displaying their wealth changes along with that,” she told the BBC World Service.
“Quieter” brands like Hermes and the firms targeting the ultra-rich like Chanel or Montclair, were likely to weather the downturn better than highly visible brands like Gucci and “aspirational” ones like Coach or Burberry, she said.
Mr Murphy said he was “pleased” with Mr Schulman's appointment.
“Josh is a proven leader with an outstanding record of building global luxury brands and driving profitable growth,” he added.
Mr Schulman said he was “deeply honoured” to lead Burberry.
“Burberry is an extraordinary luxury brand, quintessentially British, equal parts heritage and innovation,” he said. Shares in Burberry have more than halved over the past year, and they fell a further 17% on Monday.
“It’s super tough for luxury brands reliant on aspirational shoppers,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“They aren’t as insulated as the super-rich from the pressures whipped up in an era of high interest rates and an uncertain economic climate.
“Chopping and changing collections to attract the eye of hard-to-please fashion editors can confuse customers and there is set to be a return to the brand’s core principles and the traditional focus on dressing the elite,” Ms Streeter added.
— CutC by bbc.com
