British luxury fashion brand Burberry is experiencing difficulties.
Shares of Burberry dropped by 16% in early afternoon trading after the company announced poor first-quarter earnings. The company warned of a decline in profits and stated that it would be replacing its chief executive, Jonathan Akeroyd.
On Monday, Burberry, known for its iconic coats, announced that Akeroyd’s departure would be immediate. The company revealed “disappointing” results in the luxury market, describing it as “more challenging than expected,” mainly due to weak demand from Chinese customers.
Burberry stated that Akeroyd is leaving “by mutual agreement with the board.” He will be succeeded by former Michael Kors boss Joshua Schulman, who will take over as chief executive on July 17.
The company made this unexpected announcement while warning that it could face an operating loss for the first half of the year if retail sales continue to decline at their current rate. Additionally, Burberry said it has decided to “suspend its dividend payments” due to current trading conditions.
Gerry Murphy, Chairman of Burberry, acknowledged the firm’s “disappointing” first-quarter performance but emphasized that the company is taking “decisive action” to improve 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 also announced a 45-day consultation process, which could result in up to 400 job cuts, as first reported by the Telegraph.