Breaking News: Burberry Replaces CEO, Suspends Dividend Amid Profit Warning
Company Struggles to Revive Brand Amid Luxury Sector Downturn
Burberry, the iconic British fashion group, has replaced its chief executive, Jonathan Akeroyd, and suspended its dividend after warning that annual profits will fall short of expectations. The company, known for its luxurious trenchcoats, has struggled to revive its brand and take it upmarket in the face of a wider downturn in the luxury sector.
New CEO Appointed
Akeroyd, who had been in the role for two years, will be replaced by Joshua Schulman, a former chief executive of Coach and Jimmy Choo. Schulman, 52, will join as chief executive on July 17 and will be based at Burberry’s head office in London. Gerry Murphy, Burberry’s chair, praised Schulman’s "outstanding record of building global luxury brands and driving profitable growth."
Company Struggles to Revive Brand
Under Akeroyd’s leadership, Burberry had sought to put "Britishness" at the heart of efforts to revive the brand and take it upmarket with designs by Bradford-born creative director Daniel Lee, who joined in 2022. However, the company has struggled to engineer a recovery, with sales falling across all its markets in the first quarter of the year.
Weak Trading Continues
Burberry reported a 21% drop in same-store sales in the first quarter, with the exception of Japan. The company warned that if the weak trading continues into the second quarter, it would report an operating loss for the first half and that annual profits would be below expectations.
Dividend Suspended
As a result of the deterioration in trading, Burberry has suspended its full-year dividend to strengthen its balance sheet. The company had previously lowered its guidance in January, but the latest snapshot of trading is "incrementally worse," according to Piral Dadhania, an analyst at RBC Capital Markets.
Luxury Sector Downturn
The luxury sector has been experiencing a downturn, with some companies struggling to reboot their brands. Kering, the parent company of Gucci, has found it hard to revive its flagship brand, while Hermès, the maker of Birkin bags, reported a 17% increase in quarterly revenues.
What’s Next for Burberry?
The company is now focusing on strengthening its balance sheet and implementing a new strategy under Schulman’s leadership. Burberry has also announced plans to reduce its debt and improve its cash flow.
Conclusion
Burberry’s decision to replace its CEO and suspend its dividend is a significant move, signaling the company’s struggles to revive its brand and take it upmarket in the face of a wider downturn in the luxury sector. The company’s new CEO, Joshua Schulman, will face significant challenges in turning the brand around and improving its financial performance.
FAQs
Q: Why has Burberry replaced its CEO?
A: Burberry has replaced its CEO, Jonathan Akeroyd, after warning that annual profits will fall short of expectations.
Q: Who is replacing Akeroyd as CEO?
A: Joshua Schulman, a former chief executive of Coach and Jimmy Choo, will replace Akeroyd as CEO.
Q: Why has Burberry suspended its dividend?
A: Burberry has suspended its dividend to strengthen its balance sheet and improve its financial performance.
Q: What is the outlook for Burberry’s financial performance?
A: Burberry has warned that its annual profits will be below expectations, and its trading performance is expected to be weak in the second quarter.
Q: What is the impact of the luxury sector downturn on Burberry?
A: The luxury sector downturn has had a significant impact on Burberry’s trading performance, with sales falling across all its markets in the first quarter.
Author: www.ft.com
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