British luxury fashion house Burberry is facing a challenging period.
Burberry’s shares dropped 16% in early afternoon trading after the company disclosed disappointing first-quarter earnings. The company also announced a profit slump and the immediate replacement of its chief executive, Jonathan Akeroyd.
On Monday, Burberry stated that Akeroyd’s exit was by mutual agreement with the board. Former Michael Kors CEO, Joshua Schulman, will step in as the new chief executive on July 17. The company’s struggles were significantly impacted by weaker-than-expected demand from Chinese consumers.
Burberry issued a warning of an operational loss for the first half of the year if retail sales continue their downward trend. Consequently, the firm has decided to suspend its dividend payments.
Chairman Gerry Murphy described the first quarter results as “disappointing,” but assured that Burberry is implementing “decisive action” to address the sales decline.
“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 stated.
Earlier in the month, Burberry indicated it was entering a 45-day consultation period, which could result in up to 400 job cuts, as first reported by the Telegraph.