What's Happening with Luxury Brand Burberry? CEO Replacement and Dividend Suspension

British luxury company Burberry Group took bold measures such as replacing its CEO and suspending dividends after quarterly sales plummeted by more than 20% due to a downturn in key markets including China.

Jerry Murphy, Chairman of Burberry Group, stated on the 15th (local time), "Our first-quarter (April to June) results are disappointing," adding, "We quickly implemented creative transformations in the luxury market, which has been more challenging than expected, but weaknesses have deepened this year. If the current trend continues, an operating loss is expected for the first half of the year."

The first-quarter sales released that day recorded ?458 million, down 22% from the same period last year. This was due to the sluggishness of major luxury markets. Looking at comparable store sales by region, the Asia-Pacific region (-23%) showed particularly notable weakness. While Japan grew by 6%, mainland China recorded -21%, South Asia-Pacific -38%, and South Korea -26%.

Accordingly, Burberry will replace CEO Jonathan Akeroyd after two and a half years in office. Joshua Schulman, former CEO of Coach and Jimmy Choo, will take over as the new CEO from the 17th and lead Burberry.

Dividend payments will also be suspended. Burberry expects that if the current trend continues, not only will there be an operating loss in the first half of the year, but the annual performance will also fall short of initial expectations. The decision to suspend dividend payments will not apply to the final dividend by March 30, 2024. Approval will be sought at the shareholders' meeting on July 16 ahead of the payment scheduled for August.

Along with this, to strengthen its core customer base amid the luxury market downturn, Burberry plans to implement product realignment, improve brand communications including the outerwear campaign to be launched globally in October, update its website, and carry out various cost-cutting measures to offset the impact of inflation.

Chairman Murphy said, "The measures we are taking, including cost reductions, will lead to improvements in the second half of the year," adding, "We expect to strengthen our competitive position and support long-term growth." On the same day, Burberry's stock price plunged more than 16% on the London Stock Exchange.