London (AFP) – British luxury fashion label Burberry said Wednesday it could shed almost one-fifth of its global workforce over two years to reduce costs as it fell into an annual net loss. The troubled group is undergoing a turnaround plan to help boost sales and cut costs as the global luxury sector struggles with weak consumer demand, notably from China.
Burberry’s net loss stood at £75 million ($100 million) in the 12 months to the end of March, compared to a profit of £270 million one year earlier, Burberry said in a statement. Revenue slid 17 percent to £2.46 billion. Further cost-saving measures were announced on Wednesday, targeting additional savings of £60 million by 2027, which would impact around 18 percent of its workforce, or 1,700 people.
“While we are operating against a difficult macroeconomic backdrop and are still in the early stages of our turnaround, I am more optimistic than ever that Burberry’s best days are ahead,” said chief executive Joshua Schulman. Schulman, who in July replaced Jonathan Akeroyd as CEO, has vowed to win back customers with a renewed focus on outerwear, including its famed trench coats. Burberry’s staple outerwear and scarves outperformed its other products, the group said in the earnings statement, in a positive sign for the turnaround plan launched in November.
The group warned, however, that the economic environment has become “more uncertain in light of geopolitical developments,” as the fallout from US tariffs threatens to dampen consumer confidence.
– ‘Momentum building’ –
The news of cost-cutting plans and a better-than-expected fourth quarter sent shares in Burberry soaring more than eight percent in morning deals on London’s FTSE 250 index. Burberry exited London’s top-tier FTSE 100 index in September after 15 years, with analysts citing strategic mistakes and weak demand from China.
“Without question, there is some momentum building,” said Richard Hunter, head of markets at Interactive Investor. “Burberry will want to consign the past year to the history books as soon as possible…but the new strategy will take time to filter through,” he added. Despite Wednesday’s surge, the group’s share price remains down around 25 percent over the past 12 months.
“The refreshed fashion strategy is helping to stem the decline, but patience is wearing thin,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. Burberry “doesn’t have the same pull of its ultra-luxe rivals, and aspirational shoppers are more cautious, without the deep pockets of wealth to keep them insulated,” she added.
The Asia-Pacific region saw Burberry’s largest decline in comparable store sales in the reported year, with turnover in mainland China falling 15 percent. China is the world’s biggest spender in the luxury sector, accounting for half of global sales. But as the country’s post-pandemic recovery falters, consumption has flagged, sending jitters across the globe.
© 2024 AFP
