Burberry’s new CEO, Joshua Schulman, who previously led Coach, has inherited a significant strategic dilemma.
On Monday, Schulman was announced as the successor to Jonathan Akeroyd, making him the fourth CEO in a decade for the £2.6 billion ($3.36 billion) British fashion house.
Chairman Gerry Murphy committed to continuing Burberry’s push to compete with top-tier European luxury brands like Louis Vuitton, Chanel, and Dior.
This announcement disappointed those hoping for a focus on lower-priced products to reverse years of underperformance.
By Friday, Burberry’s shares had dropped to 722 pence, down 19% since the announcement.
Murphy described the management change as a “nudge of the tiller and adjustment rather than a fundamental change of strategy.”
The challenge remains to reinvigorate sales and build new expectations around the historic brand, especially as inflation-weary shoppers reduce their spending, a challenge also seen by larger rival Gucci.
Under Marco Gobbetti (2017-2021), who hired designer Riccardo Tisci, Burberry attempted to elevate its products to the top end of luxury fashion with limited financial success.
Akeroyd, CEO from 2022, focused on higher-margin accessories like the medium-sized Knight leather bag, priced at £2,090 ($2,701.12), launched by designer Daniel Lee.
Despite Lee’s edgy designs generating buzz, the drive into high luxury left investors unimpressed, with underlying sales down 21% year-on-year in the 13 weeks to the end of June.
Burberry has scrapped its dividend and warned of an operating loss for the first half of its fiscal year.
In the past decade, Burberry’s shares have halved in value, while LVMH’s have risen nearly 400%, and they have also underperformed Kering’s shares despite Gucci’s struggles.
Murphy acknowledged that Burberry had moved too quickly with new styles and pledged to refocus on British classics, noting that shoppers prefer familiar looks during economic downturns.
Some luxury experts suggest a different strategy.
Bernstein analyst Luca Solca initially saw Schulman’s appointment as a chance to refocus on lower-priced items, drawing from his success at Coach, where he relaunched the popular Tabby handbag.
However, Murphy’s comments tempered these expectations.
Many analysts remain skeptical about Burberry’s ability to regain market share.
The company aims to redirect marketing to iconic items and cut costs, but the impact of these new priorities remains uncertain.
Citi analyst Thomas Chauvet noted that consensus estimates for 2025 EBIT of £298 million could be halved.
Art Hogan, chief market strategist at B Riley Financial, stated, “I wouldn’t expect any turnaround to be rapid.”