British luxury fashion house Burberry is facing significant challenges.
Shares of Burberry plunged 16% during early afternoon trading following the company’s report of poor first-quarter earnings. The report included a warning of a profit slump and the announcement that CEO Jonathan Akeroyd would be replaced.
On Monday, Burberry stated that Akeroyd’s departure would be immediate, citing the “disappointing” results in the luxury market, which were more challenging than anticipated due to weak demand from Chinese customers.
Burberry announced that Akeroyd is leaving by mutual agreement with the board and will be succeeded by former Michael Kors CEO Joshua Schulman, who will take over on July 17.
The unexpected announcement came as Burberry warned it might report an operating loss for the first half of the year if retail sales continue to decline at the current rate. The company also said it would suspend dividend payments due to current trading conditions.
Gerry Murphy, Chairman of Burberry, acknowledged the disappointing first-quarter performance but emphasized that the company is taking decisive actions to address 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.
Additionally, Burberry began a 45-day consultation process earlier this month, as first reported by the Telegraph, which could result in up to 400 job cuts.