In a strategic shift aimed at stabilizing its operations, Burberry has announced a £40 million cost-cutting program under the leadership of its new chief executive, Joshua Schulman. This initiative arises from the pressing need to revitalize the British luxury fashion brand that has faced challenges in recent years.
Schulman, previously at the helm of Coach, replaced Jonathan Akeroyd in July. Since taking charge, he has focused on steering Burberry back to its core strengths—particularly in outerwear and timeless collections that define the brand. In a statement reflecting the urgency of this turnaround, Schulman mentioned that Burberry had strayed too far from its distinguished heritage, which prominently features iconic items like trench coats and the renowned Burberry check pattern.
As part of the cost-saving measures, approximately £25 million is expected to be implemented in the 2025 financial year. Schulman’s plan encompasses not only financial adjustments but also a significant marketing campaign dubbed “It’s Always Burberry Weather.” This campaign will feature the introduction of “scarf bars,” starting at their flagship store on 57th Street in New York. Additionally, several key managerial appointments have been made in areas such as marketing and product merchandising, with a strong focus on the Americas.
Burberry’s recent performance has raised alarms within the company. Earlier this year, the brand issued two profit warnings, which were indicative of a broader downturn in the luxury sector impacting many of its competitors—including Kering, the parent company of Gucci and Balenciaga. The global luxury market has encountered a slowdown, prompting even established brands to reassess their strategies.
Schulman identified several factors contributing to the company’s recent challenges. He emphasized the importance of consistent brand execution and a dedicated focus on core customer segments, particularly those loyal to the outerwear category. His commitment to addressing these issues is critical as Burberry seeks to “course correct” and secure sustainable, profitable growth. However, Schulman cautioned that the path to recovery would not be immediate. In a likely reflection of the challenging macroeconomic environment, Burberry’s statement acknowledged uncertainty about whether upcoming results would offset the significant losses incurred during the first half of the year.
Indeed, the brand reported a staggering £41 million loss over six months ending September, a sharp descent from an adjusted operating profit of £223 million during the same period the previous year. Revenues also took a hit, plummeting by 22% to just under £1.1 billion. With the crucial festive trading period on the horizon, Schulman’s approach will be closely scrutinized by investors and analysts alike.
Despite these challenges, Schulman expressed optimism regarding Burberry’s potential. He pointed out that the brand maintains a strong appeal among luxury buyers and boasts a commanding presence in key markets. He believes that revitalizing brand desire and enhancing performance can lead to long-term value creation. Market response to the announced cost-cutting measures was immediately positive; Burberry’s shares surged by 13% on the day of the announcement, making it the day’s top riser on the FTSE 250.
In summary, Burberry’s new direction under Schulman marks a pivotal moment for the brand. By refocusing on outerwear and refining its marketing strategies, Burberry aims to reconnect with its heritage while navigating the current challenges facing the luxury sector. The success of this turnaround plan will depend on the company’s ability to manage costs effectively and recapture the attention of discerning luxury consumers.
