Shares of Burberry fall 15% after the opulent brand issues a financial warning and changes its CEO
Burberry's stock fell more than 15% in early trading on Monday following the company's loss-making first-quarter results, which prompted it to slash its dividend, change its CEO, and issue a profit warning.
The 168-year-old British luxury conglomerate stated that it anticipates reporting an operational loss for the first half of this year and an operating profit for the entire year that is lower than the current consensus if the recent downturn in trading persists.
In addition, it halted dividend payments and appointed Joshua Schulman, the former CEO of Coach and Michael Kors, to the position of CEO. The corporation also stated that Jonathan Akeroyd is leaving "with immediate effect by mutual agreement with the Board."
As of 9:54 a.m. London time, shares had dropped 15.4%.
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Burberry Chair Gerry Murphy called the company's first-quarter performance "disappointing," adding, "The weakness we highlighted coming into FY25 has deepened and if the current trend persists through our Q2, we expect to report an operating loss for our first half."
"We have chosen to halt dividend payments with regard to FY25 in light of current trading... We anticipate that the steps we are taking, including cost-cutting measures, will bolster our competitive position, support long-term growth, and begin to show results in the second half of the year.
In the 12 weeks leading up to June 29, Burberry reported a 21% decline in comparable store sales, with retail revenue totaling £458 million during that time. Regionally, sales fell by 23% in Asia Pacific and the Americas and by 16% in EMEIA (Europe, the Middle East, India, and Africa).
The results were "incrementally worse vs the already lowered guidance (in January) for FY24," according to RBC analysts Richard Chamberlain and Piral Dadhania.
"We believe that Burberry needs to address these soft brand momentum issues as soon as possible in order to prevent further losses in market share," they continued, citing current trading trends.
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A growing number of consumers in Asia and Europe are experiencing financial problems, and the corporation has been grappling with a declining taste for luxury in all of its major regions.
The luxury market is slowing down, and Burberry noted that this is the case in all major markets. This is causing the sector to slow down.
With the goal of "reconnecting with our core customer base," the firm stated that it would concentrate on refining its brand communications, updating its website, rebalancing its products "to include a broader everyday luxury offer," and delivering cost reductions.
The company, which is well-known for its trench coats, purses, and "Burberry check," has been working for a while to elevate its brand.
Former Versace and Alexander McQueen employee Akeroyd accepted the challenge in 2021, succeeding Marco Gobbetti, who had initiated a five-year recovery plan in 2017.
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