Burberry replaces its CEO amid challenges in the luxury goods sector

Burberry, as well as Cartier-owner Richemont, face challenging year-earlier comparisons when they report this week as earnings season returns in earnest. Picture: Jonathan Brady/PA Wire

Burberry replaced its chief executive and issued a profit warning after a downturn in the luxury industry thwarted the iconic trenchcoat maker’s effort to challenge high-end labels such as Chanel and Louis Vuitton.

Shares in the British company plunged nearly 17% after it announced Jonathan Akeroyd was departing after less than two-and-a-half years. He is being replaced by Joshua Schulman, a former chief executive of Michael Kors, Coach and Jimmy Choo.

Burberry also suspended its dividend on Monday and said the slowdown in luxury sector sales has persisted into July. It said if the situation continued, it would report a loss for the first six months of the year as well as full-year profit below expectations.

The company is consulting on job cuts to slash costs, chief financial officer Kate Ferry confirmed to reporters on a call. These would mainly be corporate roles in the UK and it means “a few hundred” jobs are at risk globally, she said.

By tapping a former executive of US brands aimed at a broader customer base, Burberry is rowing back on its plan to target wealthy shoppers enamoured of French and Italian luxury labels. The company has been trying to reposition itself as a high-end luxury brand but the strategy has failed to bear fruit.

Burberry, as well as Cartier-owner Richemont, face challenging year-earlier comparisons when they report this week as earnings season returns in earnest. 

For both, last year’s fiscal first quarter coincided with China’s re-emergence from lockdown, offering growth before demand swooned later in the year.

Richemont’s resilient jewellery business should act as a buffer, but there’s no let-up in sight for Burberry as it navigates a strategy turnaround.

Meanwhile, Swatch, the world's biggest watchmaker, reported a steep drop in first half sales and earnings on Monday as demand for luxury goods in China remained weak, but forecast business would improve significantly later in 2024.

The Swiss maker of Tissot, Longines and Omega watches, as well as the eponymous plastic Swatch watches, said net sales at current exchange rates dropped 14.3% to 3.45bn Swiss francs (€3.5bn) in the January-June period.

The company's shares plunged more than 11.5%, on track for their worst day in more than four years.

Bloomberg and Reuters