Luxury fashion house Burberry faces turbulence after a disappointing first quarter. The company’s shares fell 11% in early trading on Monday following a series of announcements, including a profit warning, CEO replacement and dividend suspension.
Financial outlook bleak
Burberry painted a bleak picture of its near-term future. Citing a deepening sales slowdown, the company warned of potential operating losses for the first half of the year and a full-year profit that would be lower than current expectations. The gloomy outlook comes as sales fell significantly across its regions: Europe, the Middle East, India and Africa (EMEIA), Asia Pacific and the Americas, with comparable store sales down 21% in the last three months.
Management reorganization and strategic change
In response to these challenges, Burberry announced the departure of CEO Jonathan Akeroyd and the appointment of Joshua Schulman, former head of Michael Kors and Coach, as his replacement. The company also made the difficult decision to suspend dividend payments for the current fiscal year.
Reconnect with the core
Looking toward a turnaround, Burberry has outlined plans to “reconnect with our core customer base.” The strategy includes reorganizing product lines to offer a broader range of everyday luxury items, refining the brand’s messaging, modernizing its website and implementing cost-saving measures.
Burberry’s situation highlights the vulnerabilities of luxury brands in a volatile economic climate. The company’s future path depends on the successful execution of its strategic renewal and management of current market challenges.