British luxury fashion house Burberry is facing significant challenges.
Burberry’s shares fell by 16% during early afternoon trading following the release of disappointing first-quarter earnings. The company warned of a decline in profits and announced the departure of its chief executive, Jonathan Akeroyd.
On Monday, Burberry stated that Akeroyd’s departure would take effect immediately. The company cited “disappointing” results in the luxury market, which have been “more challenging than expected,” largely due to weak demand from Chinese customers.
The company announced that Akeroyd is leaving “by mutual agreement with the board.” Joshua Schulman, former Michael Kors CEO, will replace him as chief executive, starting on July 17.
Burberry made this unexpected announcement, warning that they might post an operating loss for the first half of the year if retail sales continue to decline at the current rate. Furthermore, due to ongoing trading conditions, Burberry decided to “suspend its dividend payments.”
Gerry Murphy, Burberry’s Chairman, described the firm’s first-quarter performance as “disappointing” but emphasized that the company is taking “decisive action” to address its weak sales.
“We expect the actions we are taking, including cost savings, to begin delivering improvements in our second half, strengthen our competitive position, and support long-term growth,” Murphy said.
Earlier this month, Burberry initiated a 45-day consultation process, indicating that it could eliminate up to 400 jobs, as first reported by the Telegraph.