[LONDON] Burberry Group plans to cut almost one-fifth of its work force as its new chief executive officer tries to turn around the British trench-coat maker, after its push into high fashion flopped amid a downturn in global demand for luxury goods.
The London-based company plans an additional £60 million (S$103.9 million) of savings in the next two years, affecting as many as 1,700 roles – equivalent to 18 per cent of its global workforce. The savings are on top of the £40 million set out by chief executive officer Joshua Schulman in November. Burberry’s shares soared.
The announcement came as the company reported sales fell less than expected in the fourth quarter, while Burberry’s adjusted operating profit for the year also came in higher than the analysts predicted at £26 million. Still, that is far short of the £418 million reported a year earlier.
Burberry’s shares rose as much as 10 per cent in early trading, the most in just over a month on an intraday basis. They were down 16 per cent this year through Tuesday’s close, as US President Donald Trump’s tariffs weighed on consumer confidence. The company dropped out of the UK’s benchmark FTSE 100 Index last year.
Burberry warned that the economic environment “has become more uncertain in light of geopolitical developments.”
The brand’s appeal with so-called aspirational consumers has waned amid the cost-of-living crisis and a lack of appetite for the creations Burberry’s designer Daniel Lee, who’s been at the company for more than two years.
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Turnaround bid
Schulman, who joined in July, has vowed to turn around the brand. So far, he’s tried to boost the popularity of its outerwear products including its classic trench coats, which cost about £2,000, and has indicated less focus on its handbag offering, a product that’s not part of Burberry’s heritage.
“Burberry’s signature trench coat, while an undisputed icon, poses a business challenge,” Third Bridge analyst Yanmei Tang said in a note. “As a lifetime product, it naturally limits the frequency of repeat purchases-unlike trend-driven items that bring customers back season after season.”
Under Schulman, Burberry has put out ad campaigns with British celebrities such as Kate Winslet and Jerry Hall in a bid to appeal to a wider and more global customer base.
Among the new planned cost savings, Burberry cited procurement and real estate, and said job cuts would be subject to consultation where applicable. One-off costs from the moves, which are largely in cash, are expected to total about £80 million, the company said.
In 2020, the company cut 500 positions as demand for luxury goods waned during global pandemic lockdowns. BLOOMBERG
