British luxury fashion giant Burberry is experiencing significant challenges.
Shares of Burberry dropped 16% during early afternoon trading after the company announced disappointing first-quarter earnings. The company also warned of a potential profit slump and revealed that CEO Jonathan Akeroyd would be replaced.
On Monday, Burberry stated Akeroyd’s departure was effective immediately. The company cited “disappointing” results in the luxury market, which it found more challenging than anticipated, largely due to weak demand from Chinese consumers.
Burberry announced that Akeroyd is leaving by mutual agreement with the board. Former Michael Kors boss Joshua Schulman will take over as chief executive on July 17.
The announcement, made unexpectedly, came with a warning that Burberry might post an operating loss for the first half of the year if retail sales continue to decline at the current rate. Additionally, the company announced the suspension of its dividend payments due to current trading conditions.
Gerry Murphy, Chairman at Burberry, described the company’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 revealed it was entering a 45-day consultation process, potentially leading to up to 400 job cuts, as initially reported by the Telegraph.