Burberry axes CEO and dividend as it warns on profit

British luxury group Burberry has today sacked its CEO and named former Coach boss Joshua Schulman to replace him, in the latest change at the top as it promises a “more familiar” look to help with its plan to move further upmarket.

It also warned on profit and scrapped its dividend, sending its shares to their lowest in more than a decade.

A slowdown in the luxury sector has hit the 168 year-old name harder than rivals as customers were largely unimpressed by its attempt to move beyond its classic trench coats and accessories.

For the 13 weeks to June 29, underlying sales slumped 21%. On current trends, Burberry would report an operating loss for the first half and miss annual profit forecasts, it said, prompting it to scrap this year’s dividend to invest in growth.

Shares in Burberry, which has been the worst performer among luxury stocks over the last five years, fell 16% to 744 pence, trading at levels last seen in 2010.

The business has been in a protracted turnaround.

Schulman, who was the CEO of US brand Michael Kors from 2021-2022 and before that boss 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 last decade. Daniel Lee in 2022 replaced Riccardo Tisci who left after less than five years.

The company first raised the issue of needing to return to its classic designs after a sharp fall in sales in May when stores featured Lee’s collection of bold, more expensive runway fashion.

Chris Beauchamp, chief market analyst at online trading platform IG, said today’s statement was a shock.

“This is a kitchen sink exercise par excellence, and underscores the enormity of the challenge facing Burberry in a world where Chinese sales can no longer be taken for granted,” he said.

Burberry’s chairman Gerry Murphy said the company had tried to change direction too fast in a difficult market, but he was happy with designer Lee who would not be leaving the company.

“We probably went a bit too far too fast with our creative transition,” he said on a call with reporters today.

Asked about reported job cuts, CFO Kate Ferry said the company would be seeking cost savings and a few hundred roles could be cut, mostly in its UK corporate division, but she could not comment further.

Only the high end of the luxury sector has withstood the impact of inflation and economic slowdown, together with a property crisis and record youth unemployment in the potentially huge Chinese market.

Burberry has the sector’s weakest PE ratio, 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 today knocked confidence in its peers. European luxury groups Hermes and LVMH both traded down more than 1%.

Known for dressing the English upper class in its classic camel, red and black check print, Burberry said its new offer would be “more familiar” to its core customers.

As it pursues an improvement in the second half of the year, it will launch a marketing campaign for outerwear in October and invest in its website.