Burberry Cuts Team to Cope With Financial Decline

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Luxury British fashion brand Burberry, renowned for its iconic trench coat, is facing significant restructuring under a cost-cutting program due to declining profits. The company, which has seen a one-third drop in its stock market value since the start of the year, announced plans to shed hundreds of jobs during a Zoom meeting with staff in late June.

Burberry has initiated a 45-day consultation period, indicating potential job cuts primarily at its U.K. offices. While the exact number of affected employees remains unconfirmed, reports suggest up to 400 roles could be at risk. Union officials are currently negotiating redundancy settlements with some workers.

The company’s current struggles mark a stark contrast to its heyday in the 1990s, when it was a symbol of luxury British fashion under the leadership of Rose Marie Bravo and creative director Christopher Bailey. Since then, Burberry has grappled with defining its identity, facing a challenging economic environment and shifting market dynamics.

Current CEO Jonathan Akeroyd has attributed the sales slump to slowing luxury demand, while creative director Daniel Lee’s attempts to modernise the brand have seen mixed results. A failure to fully connect with the Chinese market has also contributed to slowed sales in Asia.

In May, Burberry reported a 36% decline in full-year operating profits to just under $537 million, with a 12% drop in like-for-like sales in the final quarter. Revenue for the year ending March 30 fell by 4% to $3.7 billion. Asian sales grew by only 3% over the year, hindered by a 17% drop in the fourth quarter, and wholesale revenue is projected to decrease by about 25% in the first half of the new fiscal year.

Burberry’s challenges extend beyond financial metrics. The brand’s once-iconic check design became so ubiquitous that it lost some of its exclusive allure. Additionally, environmental controversies in 2018 revealed that Burberry had destroyed over $36 million in unsold products to prevent counterfeiting, with over $115 million in goods destroyed since then. This practice has drawn criticism from shareholders.

The company’s stock price has also taken a hit, dropping by more than half over the past five years and by around a third this year. Although the announcement of job cuts led to a slight rally, Burberry’s future remains uncertain as the brand seeks to regain its footing in a challenging global market.

With many luxury labels warning of a tougher consumer environment, Burberry needs to quickly find a way to revitalise its brand and regain consumer confidence.