Burberry has been struggling for the past few years, but there’s fresh hope with the appointment of Joshua Schulman as the brand's new CEO. Schulman, who assumed the role in July, is determined to turn around the British luxury fashion house known for its iconic trench coats and checkered outerwear. The challenges facing Burberry reflect broader issues within the luxury market, which has been grappling with decreasing consumer spending, particularly as the pandemic shifted shopper perceptions. This disconnect has proven problematic, especially in key markets like China.
Recent reports showed Burberry's retail sales dipped by 20% over the last quarter, translating to significant operating losses totaling £41 million, making it clear just how urgent the situation is. Not surprisingly, Burberry's stock has taken quite the hit lately, experiencing nearly a 50% decline this year alone. Yet on Thursday, after Schulman laid out his plans to reinvigorate the brand and admitted some of its recent missteps, investors reacted positively, sending shares up by 14.7%.
Schulman’s “Burberry Forward” plan is all about addressing these woes head-on. Schulman pointed out, "Our recent underperformance has stemmed from several factors, including inconsistent brand execution and a lack of focus on our core outerwear category and our core customer segments.” He expressed confidence for brighter days ahead, signaling to investors and consumers alike: Burberry is ready to focus on its identity.
Considering Burberry's legacy, Schulman knows there's great value to be had by returning the brand to its roots—outerwear. He also identified poor pricing strategies as another factor contributing to Burberry's recent struggles. The luxury segment saw inflated prices as brands attempted to reposition as ultra-premium players; this bolstered profit margins temporarily but alienated many loyal customers.
Burberry aims to cut costs by £40 million annually, with more than half of those savings expected to come this fiscal year. The company is also targeting £3 billion in revenue, though specifics on how quickly they'll achieve this target remain murky. The cutbacks and focus on outerwear come at a time when Burberry needs to reestablish itself as accessible luxury—striking the right balance amid rising living costs and inflation.
It's worth mentioning Schulman’s past experience at Michael Kors, where he led significant brand recoveries during his tenure. His expertise could be pivotal as Burberry attempts to regain its footing and secure its reputation among the luxury elite, particularly when there is stiff competition from well-established players like LVMH and Hermès, whose marketing prowess and brand diversification pose challenges for Burberry.
Critics note Burberry’s attempts to shift away from its long-standing identity, which may have hurt its authenticity. For more than 100 years, the brand garnered fame through its classic trench coats and checkered designs, but recent leadership changes and brand repositioning have created confusion about its core identity. Schulman's effort to refocus on Burberry's heritage may quell some negativity.
Notably, Burberry’s creative director, Daniel Lee, has also been inching toward celebrating the brand’s Britishness, hoping to remind the world of its stylish roots. Lee's vision includes highlighting the renowned Burberry check that's often associated with British culture, making it more than just fashion; it's about identity and lifestyle.
Still, the path forward is strewn with uncertainties. Analysts have warned Schulman must successfully navigate Burberry out of the financial pitfalls before it potentially faces severe ramifications like a complete overhaul or even possible acquisition talks, which have already stirred speculation. Although both Burberry and potential suitor Moncler have dismissed any merger discussions, the chatter hints at the precariousness of Burberry’s standing.
Schulman isn’t just trying to stabilize the brand’s immediate future; he’s also working toward building its long-term legacy. For now, Burberry is taking baby steps back toward its hallmark style, focusing on the design and execution aspects ingrained in its heritage. Whether Schulman can translate this strategy effectively remains to be seen, but investors are cautiously optimistic, as evidenced by the recent stock bounce. The world is watching closely as the brand battles its way back to relevance and profitability.
With Schulman at the helm, Burberry is poised to make significant changes, all underpinned by its deep-rooted British heritage and commitment to quality. A successful turnaround could well become the ultimate fashion comeback story—but it’s clear the stakes have never been higher.
