Burberry has unveiled a £40m cost-cutting programme as its new chief executive pledged to “stabilise the business” with a turnaround plan aimed at reviving the fortunes of the ailing British luxury fashion brand.
Joshua Schulman, the former Coach boss who replaced his ousted predecessor, Jonathan Akeroyd, in July, said the company was “acting with urgency” after straying too far from its roots of “timeless core collections” and outerwear, including trench coats and scarves with its distinctive Burberry check.
The new boss said he had used his first 90 days in post to start a cost-cutting programme aimed at trimming £40m from its cost base each year, about £25m of which will be pushed through during the 2025 financial year.
Burberry managers refused to confirm how many jobs could be lost as a result, saying only that they had been “streamlining” office-based teams, including at head office.
Schulman also unveiled an outerwear campaign, It’s Always Burberry Weather, involving the rollout of “scarf bars”, starting with its 57th Street flagship store in New York. He also appointed new managers across its marketing, product merchandising and planning divisions, as well as the Americas.
Schulman declined to comment on rumours that the company’s Italian rival, Moncler, may be considering a bid for the British luxury fashion brand. However, he told journalists on Thursday morning that “there are advantages to being an independent luxury brand”, adding: “We have a lot of opportunity ahead, and there’s a lot more that we can do as a plc.”
Burberry shares jumped nearly 19% – its biggest one day rise in at least 20 years - after the cost-cutting plan was announced, making the luxury retailer the top riser on the FTSE 250 on Thursday.
Burberry has issued two profit warnings this year. The brand has suffered amid a slowdown in demand for luxury goods, which also hit the sales of rivals including Kering, which owns brands including Gucci and Balenciaga, and Mulberry.
Schulman said the company’s previous strategy contributed to its setback. “Our recent under performance has stemmed from several factors, including inconsistent brand execution and a lack of focus on our core outerwear category and our core customer segment,” he said in a statement alongside Burberry’s half-year results on Thursday. “Today, we are acting with urgency to course correct, stabilise the business and position Burberry for a return to sustainable, profitable growth.”
But the company said the turnaround plan would take time to bear fruit. “In the short term, with our all-important festive trading period ahead and an uncertain macroeconomic environment, it is too early to determine whether our second-half results will fully offset the first-half adjusted operating loss,” Burberry’s statement said.
The brand swung to a £41m loss over the six months to the end of September compared with an adjusted operating profit of £223m during the same period a year earlier. Revenues fell 22% over the period, to just under £1.1bn.
The UK government’s decision to raise employers’ national insurance contributions as part of last month’s budget would also add a further £3-4bn on to Burberry’s costs, chief financial officer, Kate Ferry said. “Clearly that has been a hit for all businesses based in the UK, but we will manage that.”
Schulman said: “We have a powerful brand with broad appeal among luxury customers, authority in the outerwear and scarf categories which have remained resilient through this period, and a strong presence in all key luxury markets.
“Now, we have a clear framework to reignite brand desire, improve our performance and drive long-term value creation. Building on our strong foundations, I am confident that Burberry’s best days are ahead.”
