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Burberry has become the latest fashion brand to face choppy waters following a plunge in sales amid a wider downturn for the luxury fashion sector.
One of the UK’s standout global fashion brands, Burberry has announced it will replace boss Jonathan Akeroyd with immediate effect after only two years in the job.
He will be replaced as chief executive by former Michael Kors boss Joshua Schulman, who will take on the role later this week.
Burberry made the unexpected announcement as it warned it will record a first-half operating loss if retail sales continue to fall at the current pace, having plunged by 21 per cent on a same-store basis in its first quarter to June 29.
It said full-year earnings will also be lower than expected, and suspended its dividend, sending shares down more than 17 per cent on Monday.
Former Gianni Versace boss Mr Akeroyd took on the top job at Burberry in April 2022 with a so-called “golden hello” worth around £6 million and was tasked with returning sales to pre-pandemic levels.
There was a boom in the sector following the pandemic, as consumers engaged in “revenge shopping” to compensate for the forced savings during lockdowns.
However, Mr Akeroyd’s tenure was hampered by a raft of high-level departures and a rout in the luxury retail sector amid a global cost-of-living crunch – the last year has seen a major slowdown in sales.
Soon after he joined, its well-respected chief financial and operating officer, Julie Brown, said she was leaving after six years, while its creative director of nearly five years, Riccardo Tisci, also announced he was quitting.
Mr Tisci was replaced by former Bottega Veneta creative director Daniel Lee, while Kate Ferry became chief operating officer last year.
In the 13 weeks leading to 29 June, its comparable store sales were down 21 per cent on the same period last year. As a result, the company suspended its dividend, and is now wrestling with around 200 redundancies worldwide.
Shares in Burberry have more than halved over the past year, and they fell a further 17 per cent on Monday.
The only region in the world where Burberry saw an increase of sales was Japan – up 6 per cent. The company has historically relied on its Chinese market, however, consumer spending in China has been weak this year due to problems in the housing market and rising unemployment.
After taking over from the acclaimed Italian fashion tycoon Marco Gobbetti, Mr Akeroyd made clear he wanted to remind customers of Burberry's “Britishness” with a renewed focus on outerwear and a new heritage-inspired logo. His plan came amid claims the company had drifted far from its roots.
However, the attempt to appeal to higher-end markets backfired, and the move away from Burberry's signature check print was met with criticism. The prices of the brand’s items, such as its iconic trench coat, also skyrocketed.
The cost of living crisis has not helped Mr Akeroyd either. The luxury fashion house was hit by a 12 per cent drop in store sales across American markets, where it continues to see “a relatively broad-based decline” in retail customers.
Store sales across Europe, the Middle East and Africa rose 4 per cent for the full year but dropped 3 per cent in the first three months of this year, as the region benefited from tourist growth but struggled later on with pressure from local consumer spending that fell below double digits in the fourth quarter.
New Burberry boss Mr Schulman said: “Burberry is an extraordinary luxury brand, quintessentially British, equal parts heritage and innovation.
“Its original purpose to protect people from the weather is more relevant than ever.
“I look forward to working alongside Daniel Lee and the talented teams to drive global growth, delight our customers, and write the next chapter of the Burberry story.”
