LONDON, July 15 (Reuters) - In a significant shake-up, British luxury brand Burberry has appointed Joshua Schulman, former CEO of Coach, as its new leader in an effort to revive its fortunes. This move comes as the 168-year-old fashion house faces declining sales and a shift in customer interest away from its recent style changes.
The announcement on Monday followed the dismissal of CEO Jonathan Akeroyd, who had held the position for two years. Schulman, who also served as CEO of Michael Kors and brand president at Coach, will become Burberry's fourth CEO in a decade, assuming his role on Wednesday.
Burberry's recent attempt to diversify beyond its classic trench coats and accessories into higher-priced fashion has not resonated well with its core customers. As a result, underlying sales fell by 21% for the 13 weeks ending June 29. The company has warned of an operating loss for the first half of the year and has decided to scrap this year's dividend to focus on growth.
The impact of these challenges was evident in the market, as Burberry's shares dropped 17% to 738 pence, marking their lowest level since 2010. Over the past five years, Burberry has underperformed compared to other luxury stocks.
Chairman Gerry Murphy emphasized that while the new CEO would continue to push the brand towards the higher end of the luxury market, the company would also return to more familiar styles that have historically appealed to its loyal customers. "The appointment of Josh does not signal a repositioning of Burberry's ambition," Murphy said, clarifying that the strategy would involve subtle adjustments rather than a complete overhaul.
The brand's recent collection by designer Daniel Lee, who took over from Riccardo Tisci in 2022, included bold and more expensive runway fashion, which contributed to the sales decline. Lee will remain with the company as it navigates these changes.
The luxury market's overall slowdown, compounded by economic challenges and declining discretionary spending, particularly in China, has further strained Burberry's performance. Investor confidence was shaken not only in Burberry but also in its European peers, with shares of Hermes and LVMH both trading down.
Analysts at Deutsche Bank noted that investors were increasingly frustrated with Burberry's performance and anticipated a strategic shift. "We expect that this will start as a gentle turn but will evolve into a larger shift over time," they stated, maintaining a hold rating on the stock with a price target of 800 pence.
In response to financial pressures, CFO Kate Ferry mentioned that Burberry would seek cost savings, including potential job cuts primarily in its UK corporate division.
As Joshua Schulman steps into his new role, the industry and investors will be watching closely to see how his leadership impacts Burberry's efforts to reclaim its position in the luxury market.
