Burberry replaces CEO amid profit warnings and dividend suspension

Burberry shares plunged on Monday morning after the luxury retailer revealed the replacement of its chief executive and warned that full-year profits would fall short of forecasts.

The group told investors its retail revenue fell 22 per cent to £458m in the 13 weeks ended June 29, with Burberry reporting weak results in all major regions.

Trading was particularly difficult in Asia-Pacific and the Americas, where comparable-store sales declined 23 percent in both territories.

Burberry warned that if the current slowdown continues for the rest of the quarter, it expects to report a first-half operating loss and a full-year operating profit below consensus estimates.

The company has therefore suspended dividend payments to strengthen its balance sheet and ensure it has sufficient funds to invest in long-term growth.

Shares in the fashion brand fell 14.2 per cent to 760.6 pence in early trading, making them the biggest faller in the FTSE 100 by far.

Gerry Murphy, Burberry chairman, said: ‘We are taking decisive steps to rebalance our offering to make it more familiar to Burberry’s core customers while also delivering relevant new features.

“We expect the measures we are taking, including cost savings, to begin to bear fruit in the second half of the year and to strengthen our competitive position and support long-term growth.”

Burberry, famed for its trench coats and plaids, also announced that Joshua Schulman, former head of Michael Kors, Coach and Jimmy Choo, will join as CEO starting Wednesday.

Schulmann, 52, replaces Jonathan Akeroyd, who resigned with immediate effect just a day before Burberry’s annual general meeting, where some investors are set to give the company a hostile reception.

Akeroyd’s tenure at Burberry lasted just two years and was marked by weak sales and falling profits amid a global crisis that hit the luxury sector, caused in part by weak demand from Chinese customers.

In the last financial year, the company’s pre-tax profits fell by more than a third to £383m after revenues were severely hit in the final three months of the period.

Murphy said Schulmann is a “proven leader with an outstanding track record of building global luxury brands and driving profitable growth.”

He added: “He has a deep understanding of our brand and shares our ambition to build on Burberry’s unique creative heritage. His extensive experience in luxury and fashion will be key to realising Burberry’s full potential.”

Schulmann, 52, was also previously president of New York department store Bergdorf Goodman and held senior positions at Gucci, Gap and Yves Saint Laurent.

Originally from Los Angeles, he will move from New York to London to take up the job at Burberry, for which he will receive an annual base salary of £1.2m.

Dan Coatsworth, investment analyst at AJ Bell, believes Burberry’s difficulties make it a prime takeover target.

He said: ‘The big question now is whether Burberry is going to get itself back on track, or whether an opportunistic bidder is going to come along while the business is on its knees and take over.

‘It ticks all the boxes for someone to make an offer: depressed share price, new CEO who hasn’t had time to implement a turnaround plan, and disgruntled shareholders who might welcome a generous offer premium to offset recent losses.’