British luxury fashion giant Burberry is facing significant challenges.
Shares of Burberry dropped by 16% in early afternoon trading after the company reported disappointing first-quarter earnings and warned of a potential profit decline. Additionally, Burberry announced that its chief executive, Jonathan Akeroyd, would be stepping down.
On Monday, Burberry revealed that Akeroyd’s departure is effective immediately. The company attributed its lackluster results to a “more challenging than expected” luxury market, with particularly 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 assume the role of chief executive on July 17.
The sudden announcement came as Burberry cautioned that it might incur an operating loss in the first half of the year if declining retail sales persist. The company also decided to suspend its dividend payments due to the current trading environment.
Gerry Murphy, Chairman at Burberry, acknowledged the disappointing first-quarter performance but emphasized that the company is taking decisive measures 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 indicated it might cut up to 400 jobs as part of a 45-day consultation process, as initially reported by the Telegraph.