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Shares in Burberry plunged over 15% in early trading on Monday after a disappointing first-quarter performance led it to issue a profit warning, replace its CEO and axe its dividend.
The 168-year-old British luxury giant said that if the recent trading slowdown continues, it expects to report an operating loss for the first half of this year and full-year operating profit below current consensus.
It also suspended its dividend and named Joshua Schulman — who formerly led Michael Kors and Coach — as new CEO. Jonathan Akeroyd is stepping down “with immediate effect by mutual agreement with the Board,” the company added.
Shares were 15.4% lower at 9:54 a.m. London time.
“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,” Burberry Chair Gerry Murphy said in a trading update, describing the company’s first-quarter performance as “disappointing.”
“In light of current trading, we have decided to suspend dividend payments in respect of FY25 … We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth.”
Burberry said comparable store sales fell 21% in the 12 weeks to June 29, with retail revenue coming in at £458 million for the period. On a regional basis, sales slipped 16% in EMEIA (Europe, the Middle East, India and Africa), and 23% in both Asia Pacific and the Americas.
RBC analysts Piral Dadhania and Richard Chamberlain said the results were “incrementally worse vs the already lowered guidance (in January) for FY24.”
“Current trading trends point to soft brand momentum for the Burberry brand which in our view needs to be addressed soon enough for Burberry to contain any further market share losses,” they added.
The company has been battling with dwindling luxury appetite across its major markets, with a cost-of-living crisis affecting its European and U.S. customers, and economic concerns plaguing Asian consumers.
“We are operating against a backdrop of slowing luxury demand with all key regions impacted by macroeconomic uncertainty and contributing to the sector slowdown,” Burberry added.
Outlining a desire to “reconnect with our core customer base,” the company said it planned to focus on rebalancing its products “to include a broader everyday luxury offer,” refine its brand communications, refresh its website, and deliver cost savings.
Famous for its trench coats, bags and “Burberry check,” the company has for some years been attempting to make its brand more upmarket.
Akeroyd, who previously worked at Versace and Alexander McQueen, took up the challenge in 2021, taking over from predecessor Marco Gobbetti who launched a five-year turnaround plan in 2017.