British luxury fashion brand Burberry is experiencing significant challenges.
Shares of Burberry dropped 16% during early afternoon trading after the company reported poor first-quarter earnings. The company warned of a decline in profits and announced the immediate departure of its chief executive Jonathan Akeroyd.
On Monday, Burberry, known for its iconic coats, revealed that Akeroyd’s exit is effective immediately and came “by mutual agreement with the board.” He will be replaced by former Michael Kors leader Joshua Schulman, who will start on July 17.
Burberry attributed the disappointing earnings to a more challenging luxury market than anticipated, particularly due to weak demand from Chinese consumers. The company also warned of an operating loss for the first half of the year if retail sales continue to decline at the current rate. Additionally, Burberry has decided to suspend its dividend payments due to current trading conditions.
Burberry Chairman Gerry Murphy described the first-quarter performance as “disappointing” but emphasized that the company is taking “decisive action” to improve its sales.
Murphy stated, “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.”
Earlier this month, Burberry began a 45-day consultation process indicating that it could cut up to 400 jobs, as reported by the Telegraph.