British luxury fashion house Burberry is experiencing significant challenges.
Shares of Burberry plunged 16% in early afternoon trading after the company announced disappointing first-quarter earnings, warned of a dip in profits, and revealed plans to replace its chief executive, Jonathan Akeroyd.
On Monday, Burberry stated that Akeroyd’s departure would be immediate. The company reported “disappointing” results in the luxury market, which turned out to be “more challenging than expected,” primarily due to sluggish demand from Chinese customers.
Burberry announced that Akeroyd is leaving “by mutual agreement with the board” and will be replaced by former Michael Kors CEO Joshua Schulman, who will take over on July 17.
This unexpected announcement came alongside a warning that Burberry could face an operating loss in the first half of the year if retail sales continue to decline at their current rate. Additionally, the company has decided to “suspend its dividend payments” due to ongoing trading conditions.
Gerry Murphy, Chairman at Burberry, acknowledged the firm’s first-quarter performance as “disappointing” but emphasized that Burberry is taking “decisive action” to address its weak sales.
“We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth,” Murphy said.
Earlier this month, Burberry announced a 45-day consultation process which could lead to the loss of up to 400 jobs, according to the Telegraph.