Burberry saw its quarterly sales plummet by 22 %, while CEO Jonathan Akeroyd had promised 2.5 years ago to double sales instead. A new CEO now has to find a different path to recovery.
Disappointing results
American national Joshua Schulman, who has working experience at Jimmy Choo, Coach and Michael Kors, will take Akeroyd’s place after British fashion house had to admit to abysmal quarterly figures. Sales fell 22 % in the past first quarter, to 458 million pounds (540 million euros). In both America and Asia, sales fell 23 %, whereas in Europe, Africa and the Middle East, there was a 16 % decline.
Chairman Gerry Murphy admitted that the results were “disappointing”. Burberry had been trying to turn things around led by new creative director Daniel Lee, but despite a well-received summer collection, it is proving to be “more challenging than imagined”. The luxury market is cooling down globally, but especially the waning demand in China is hurting luxury brands.
Flip-flops
For Burberry, the challenge is extra big, as the brand has been struggling with its image for years. The company has been flip-flopping between aiming for a higher position in the market and a broader, less exclusive appeal. The brand also was not sure whether to follow the latest trends to reach a younger audience, or instead market itself as a timeless archetypal British classic. The many changes in CEOs and designers in recent years make the luxury house a somewhat sinking ship that does not know how to stay on course.
The latest game of musical chairs is not helping to bring back stability: while Akeroyd was a believer in premiumisation who wanted to make Burberry more expensive, Schulman is expected to go the other way and aim for a “more inclusive and democratic” Burberry. The indecisiveness is already sending the stock market valuation down further, threatening to make Burberry an easy target for takeovers, according to analysts.
