Investors furious over disappointing Burberry figures
- Luxury fashion brand bosses likely to face uncomfortable shareholder meeting
Blinding: Singer Shakira wears a Burberry dress
Burberry has been criticised by angry investors for disappointing fashion collections and a dizzying drop in its share price, with some fearing it could leave the brand vulnerable to a takeover.
The bosses of the British luxury fashion brand are likely to face an awkward AGM on Tuesday as shareholder unrest grows.
Burberry shares have fallen from a peak of 2,609p in April 2023 to 886.6p yesterday, a fall of 66 percent.
One disgruntled investor said: ‘We need to stop the revolving door of CEOs, designers and CFOs. We need to completely overhaul the management team and the non-executive board.’
‘Burberry’s management has achieved a falling share price, with more than 4 percent of the shares being shorted (when traders bet on a fall in the share price).
“This is accompanied by a huge drop in sales, profits and cash flow. The only metric that is going up is debt.”
Even the outfits of the saleswomen in Burberry’s luxury stores reflect the current sad state of the chic brand.
“The uniforms are more Primark than premium label. To me, that’s typical of Burberry’s failed fashion strategy,” the investor said.
The mood was further soured by rumours that the low valuation of the company, which was founded in 1856, could lead to a bidder seeking to take over the firm and buy a piece of British heritage at a bargain price.
French luxury giant LVMH is seen as a potential predator and its CEO, Bernard Arnault, is known for his adeptness in turning around luxury brands that have lost their luster, such as Tiffany and Berluti.
Private equity groups could also be lurking.
According to Luca Solca, an analyst at brokerage Bernstein, Burberry has always been considered too expensive by acquisition companies. “But it is more difficult to rule out that possibility today, given the current market capitalization.”
Burberry is considered the inventor of the trench coat for soldiers during World War I. Later versions of this ‘heritage rainwear’ sell well.
But the new collection of bags and clothing from creative director Daniel Lee, appointed in 2022, seems to lack the must-have vibe for the seriously wealthy, a group Burberry is targeting with “elevated” prices. At the same time, aspirational shoppers, always a key clientele, could be put off by such prices.
Burberry is not the only company in trouble. According to management consultants Bain, China accounts for 35 percent of global luxury goods sales.
Sales and profits were also weak at Gucci, a division of the Kering conglomerate.
But investors say Burberry chief executive Jonathan Akeroyd and his fellow executives are using the delay as a smokescreen. In May, the company said pre-tax profit for the year to March fell to £383m, down from £634m the year before.
Akeroyd spoke of a “refocusing” of the brand, with an emphasis on its Britishness, but the results of this are unlikely to be seen until the second half of 2025. Burberry declined to comment yesterday.
ANNE ASHWORTH: Visiting the UK flagship store left me sad
Burberry’s flagship store in Knightsbridge is sleek and glossy, with many design details that reference the company’s heritage.
The interior is also more exciting than most of the boring merchandise on the shelves or displayed on the shelves.
At its best, Burberry combines elegance, quirky character and heritage.
Stunning: Burberry’s store on Sloane Street, London
When I visited the store yesterday, I understood why the company’s investors are concerned that the accessories and clothing lack these qualities – and are therefore demanding an immediate makeover.
You shouldn’t find the stairs more beautiful than the bags. But that’s how I felt, and it made me sad.
Sales associates are important ambassadors for any brand, and the staff at this store are friendly and welcoming. But their uniforms, in Burberry’s blue and khaki color scheme, are forbidding and cheap.
This fantastic British brand is part of our fashion heritage and the investment funds many of us save in own shares of it.
This means that we all have a stake in its future.
Burberry’s logo is ‘Prorsum’, which is Latin for ‘forward’.
But investors say it needs to stop and change its strategy. And they have a point.
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