- Warning of potential first-half loss
- FY25 dividends suspended
- New chief executive appointed
Luxury group Burberry (BRBY) posted another disappointing trading update, saying the market weakness it had experienced in the fourth quarter of its financial year to the end of March had continued into July meaning it needed to take drastic action to deliver a second-half improvement.
As well as suspending its dividend, the group said chief executive Jonathan Akeroyd would step down with immediate effect and be replaced by industry insider Joshua Schulman.
The shares fell as much as 140p or 16% to 748p in mid-morning trading, their lowest level in more than a decade and comfortably below their pandemic trough.
NO UPTURN IN SIGHT
For the first quarter to the end of June, Burberry reported retail revenue of £458 million, a drop of 21% from the same period last year on a like-for-like basis as the slowdown in global luxury sales continued.
Sales in Asia-Pacific, its most important region, fell 23%, as did sales in the Americas, another key trading region, while sales in the rest of its markets in Europe, the Middle East, India and Africa saw a 16% decline.
The only area where sales rose was Japan, which saw a 6% increase thanks to spending by Chinese tourists and near-shore customers in Asia which offset weaker domestic activity.
The firm warned if the first-quarter trend continued through the whole of the second quarter ending in September, it would likely report a first-half loss at the operating level.
Therefore, in order to protect its balance sheet and give it the working capital to keep investing in sales, dividend payments for the current financial year have been suspended.
WHAT IS THE COMPANY’S PLAN?
The firm insisted there was ‘an opportunity to reconnect with our core customer base and capitalise on the enduring appeal of Burberry's iconic products and brand whilst delivering relevant newness’.
To that end, it is rebalancing its product range to include a broader ‘everyday luxury’ offer and expand in key categories, while advertising will focus on its classic outerwear products and its website will be refreshed in an attempt to improve customer conversion rates.
The big news, however, was the replacement of Jonathan Akeroyd as CEO with Joshua Schulman, an industry executive with a strong track record at other luxury fashion and retail businesses.
Schulman was previously chief executive of Jimmy Choo in London before becoming president of Bergdorf Goodman, then chief executive of US luxury brand Coach (now part of Tapestry (TPR:NYSE)) and most recently chief executive of Michael Kors, which is owned by Capri Holdings (CPRI:NYSE).
In its defence, Burberry wasn’t the only luxury company to disappoint the market – Swiss watch-maker Swatch Group (UHR:SWX) posted weak first-half sales and earnings, sending its shares down by CHF 20 or 11% to a post-pandemic low of CHF 168.
The maker of Omega, Longines and Tissot watches, as well as its namesake brand, said sales dropped 14% and operating profit fell 70% due to a slump in sales in China, echoing comments by the UK fashion group.
