Joshua Schulman, Burberry’s new CEO, is immediately confronted with a strategic puzzle. On Monday, the former CEO of Coach was named to succeed Jonathan Akeroyd, becoming the fourth CEO of the 2.6 billion pound ($3.36 billion) British design firm in 10 years.
On the same day, Chairman Gerry Murphy vowed to continue Burberry’s premium push, competing with upper-tier European luxury labels such as Louis Vuitton, Chanel, and Dior.
The message disappointed many hoping for further assurances that the producer of famed tartan trench coats would be able to reverse years of underperformance, with some expecting Schulman to focus on lower-cost items. By 0830 GMT on Friday, shares were trading at 722 pence, down approximately 19% from before the news.
In a call with media on Monday, Murphy framed the rapid top management transfer as “a nudge of the tiller and adjustment rather than a fundamental change in strategy.”
The label’s problems in rekindling sales highlight the difficulty of creating new expectations around historic brands, especially when inflation-hit buyers are less inclined to browse stores, as shown at larger rival Gucci, owned by Kering, which opens a new tab conglomerate.
Consider Burberry. Under Marco Gobbetti, who led the firm from 2017 to 2021 and hired designer Riccardo Tisci, the company began to focus on elevating its products to the pinnacle of luxury fashion, despite limited financial success.
Outgoing CEO Akeroyd, who will take over in 2022, has pinned Burberry’s turnaround on higher-margin accessories, such as the medium-sized Knight leather bag, which was created last year by designer Daniel Lee and is presently priced at 2,090 pounds ($2,701.12).
Lee’s daring designs created some attention for the company, but the push into the upper echelons of luxury has kept investors waiting. Underlying sales fell 21% year on year in the 13 weeks leading up to the end of June. Burberry has cancelled its dividend and warned that it expects to report an operational loss in the first half of its fiscal year.
Burberry’s stock has halved in value over the last decade, whereas LVMH’s has increased by roughly 400 percent. They have also underperformed Kering shares, even though the conglomerate’s flagship brand, Gucci, is struggling.
Murphy claimed Burberry had gone too fast and too far with new styles and vowed to focus on British house classics, adding that buyers prefer more familiar looks during economic downturns.
Some luxury experts say the British firm should take a different approach.
Bernstein analyst Luca Solca first saw Schulman’s arrival as an opportunity for the label to use his experience in American accessible luxury to refocus on more basic, lower-priced items.
The executive, who led mid-range company Coach from 2017 to 2020, is credited with relaunching the label’s hugely popular Tabby handbag, which can sell for up to $750 and has been a significant growth driver.
According to GlobalData, the US brand’s global market share climbed to 2.9% from 2.8% between 2010 and 2023, while Burberry’s fell to 2.4% during the same period.
However, after Murphy’s comments on tactics, Solca stated, “We tempered our excitement.”
Burberry’s leadership transition has left many experts unimpressed. Burberry will reclaim market share soon.
The corporation stated that it would shift marketing efforts to classic products while attempting to save costs. However, the potential for such new goals to be revolutionary “remains unclear,” according to Citi analyst Thomas Chauvet, who predicts that the consensus projection for 2025 profits before interest and tax (EBIT) of 298 million pounds might be cut in half.
“I wouldn’t expect a rapid turnaround,” said Art Hogan, chief market strategist at asset management firm B Riley Financial.
