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Burberry’s new chief executive said he was “acting with urgency” to stabilise the British luxury brand as it swung to a half-year loss and unveiled a turnaround plan, sending its shares up nearly 15 per cent on Thursday.
The company, which has had a challenging time over the past year amid a downturn in luxury spending and a botched strategy to move upmarket, warned it was too early to say whether it would be back in profit this year.
Chief executive Joshua Schulman on Thursday set out a £40mn cost-savings plan and a £3bn annual revenue target, albeit without an explicit timeline, and said he would “course correct” to “position Burberry for a return to sustainable, profitable growth”. Under previous management, the company had a £5bn long-term revenue target.
Schulman insisted Burberry would continue to be a luxury brand and he had “no plans to [turn] Burberry into an accessible luxury brand” amid analyst speculation that it could become “the British Coach”, referring to the US handbag brand.
However, he said Burberry would have a broader range of price points, including lower ones in certain categories such as leather handbags. Burberry staples such as trench coats would also have entry price points but the range would continue up to pricier models including its leather ones, which cost £7,900.
Under its previous boss Jonathan Akeroyd the company sought to put “Britishness” at the heart of efforts to revive the brand and take it more upmarket, but the move backfired. Chair Gerry Murphy admitted previously that Burberry “probably went a bit too far, too fast” with its premium ambition.
The company’s stock has fallen around 50 per cent over the past year.
Revenue fell 22 per cent to £1.1bn in the six months to September 28, from £1.3bn the year before, dragged down by weaker performance in Asia and the US. The company posted a pre-tax loss of £80mn, compared with a £219mn profit the previous year, and an adjusted operating loss of £41mn.
Group comparable store sales declined 20 per cent in the period, with Asia-Pacific and the Americas down 25 per cent and 21 per cent respectively.
Schulman, who previously worked for Coach and Jimmy Choo and joined the business in July, set out measures to revive the brand including refocusing on core products such as outerwear and scarves, increasing store productivity, achieving better pricing and reducing its inventory.
He added that the 168-year brand which pioneered a new breathable fabric for outerwear in the late 1800s and is now best known for its trench coats, ought to celebrate its heritage as well as innovate.
“At its best, Burberry has done that in a way that surprises and delights customers and brings the spirit of Britain around the world,” he said.
Schulman was also bullish about consumers in China, despite weak consumer demand in the country, adding that it remained “a very important market for Burberry”.
“Never underestimate the power of the Chinese consumer and their resilience and the long-term trajectory of the market. We believe that these are cyclical issues, and that, as they have done in the past, the Chinese consumer will come roaring back.”
Schulman said on Thursday that the product line-up had been overly “weighted to seasonal fashion with a niche aesthetic obscuring our more timeless core collections”.
He added that Burberry’s recent underperformance “stemmed from several factors, including inconsistent brand execution and a lack of focus on our core outerwear category and our core customer segments”.
