Shares in luxury goods maker, Burberry plunged 16% on Monday after a disappointing first-quarter performance saw it issue a profit warning, replace its CEO and axe its dividend. Especially notable in the update was the 20% plus crunch in global sales in the latest 12 week period.
The shares in fact tumbled to a 52 week low on the news as the company warned that if the recent trading slowdown continues, it expects to report an operating loss for the first half of this year and full-year operating profit below current forecasts.
It also suspended its dividend and named Joshua Schulman — who formerly led rival luxury groups, Michael Kors and Coach — as new CEO. Incumbent no more, Jonathan Akeroyd is stepping down “with immediate effect by mutual agreement with the Board,” the Burberry added.
The news hit the shares of other luxury groups – Parada shares were down 3.9% and Christian Dior lost 1.7% and shares in sector leaders LVMH and Hermes each lost 2.6% or more.
The luxury goods sector is now awaiting the June quarter update from another giant, Richemont later today. If it’s weak the industry could be in for a clean out. But unlike Burberry and its 465 fall so far in 2024, Richemont shares are up 22% year to date.
Even so that strength didn’t protect Richemont shares which fell more than 4% on Monday after the Burberry update.
“The weakness we highlighted coming into FY25 has deepened and if the current trend persists through our Q2, we expect to report an operating loss for our first half,” Burberry Chair Gerry Murphy said in a trading update, describing the company’s first-quarter performance as “disappointing.”
“In light of current trading, we have decided to suspend dividend payments in respect of FY25 … We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth.”
Burberry said comparable store sales fell 21% in the 12 weeks to June 29, with retail revenue coming in at £458 million for the period. On a regional basis, sales slipped 16% in EMEIA (Europe, the Middle East, India and Africa), and 23% in both Asia Pacific and the Americas.
The company pitched a pie in the sky story for recovering the lost ground, saying that it had a desire to “reconnect with our core customer base.”
Burberry said it planned to focus on rebalancing its products “to include a broader everyday luxury offer,” refine its brand communications, refresh its website, and deliver cost savings.
Bottom line is that even the cost of living pressures are hitting the luxury goods sector – especially in China which has always been a go to market for sales. Now Burberry faces a big sales slide in America as well.