Burberry replaces CEO amid profit warning, dividend suspension
- Burberry said retail sales fell 22% to £458m in the first quarter
- Trading was particularly challenging in the Asia Pacific and North and South America regions
Forecast: Burberry shares fell Monday after the company issued a profit warning
Burberry shares fell on Monday morning after the luxury retailer announced it had replaced its CEO and warned annual profits would be lower than expected.
The group told investors that retail sales fell 22 percent to £458 million in the 13 weeks to June 29. Burberry reported weak performances in all major regions.
Trading was particularly challenging in the Asia Pacific and the Americas, with comparable store sales down 23 percent in both areas.
Burberry warned that if the current slowdown continues for the rest of the quarter, the company expects to report an operating loss in the first half of the year and a full-year operating profit below consensus estimates.
As a result, the company has suspended dividend payments to strengthen its balance sheet and ensure there are sufficient resources to invest in long-term growth.
Shares in the fashion brand fell 14.2 percent to 760.6p in early trading, making them by far the biggest faller in the FTSE 100.
Gerry Murphy, chairman of Burberry, said: ‘We are taking decisive action to rebalance our offer so that it is more familiar to Burberry’s core customers, while also delivering relevant newness.
‘We expect that the measures we are taking, including cost savings, will deliver improvements in the second half of the year, strengthen our competitive position and support long-term growth.’
Burberry, known for its trench coats and tartan checks, also announced that Joshua Schulman, the former boss of Michael Kors, Coach and Jimmy Choo, will take over as CEO from Wednesday.
Schulmann, 52, succeeds Jonathan Akeroyd, who resigned effective immediately, just a day before Burberry’s annual general meeting of shareholders, where some investors are expected to receive the company with hostility.
Akeroyd spent just two years at Burberry, a period marked by weak sales and falling profits, amid a global recession in the luxury sector, partly caused by weak demand from Chinese customers.
The company’s pre-tax profits fell by more than a third to £383m in the last financial year after revenues fell sharply in the final three months of the period.
According to Murphy, Schulmann is a “proven leader with an excellent track record of building global luxury brands and driving profitable growth.”
He added: ‘He has a strong understanding of our brand and shares our ambition to build on Burberry’s unique creative heritage. His extensive experience in luxury and fashion will be key to realising Burberry’s full potential.’
Schulmann, 52, was previously president of New York department store Bergdorf Goodman and held senior positions at Gucci, Gap and Yves Saint Laurent.
Originally from Los Angeles, he is moving from New York to London to take up the job at Burberry, which will pay him a basic annual salary of £1.2 million.
Dan Coatsworth, investment analyst at AJ Bell, believes Burberry’s difficulties make it a prime takeover target.
He said: ‘The big question now is whether Burberry can get back on track on its own, or whether an opportunistic bidder will emerge while the company is already on its knees and take over.
“It meets all the conditions for an offer: a low share price, a new CEO who has not yet had time to implement a recovery plan and disgruntled shareholders who might welcome a generous offer premium to offset recent losses.”
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