LONDON — Joshua Schulman has been named chief executive officer of Burberry in stormy weather, amid a 22 percent decline in first-quarter retail revenue and the risk of an operating loss in the first fiscal half.
Schulman, 52, will succeed Jonathan Akeroyd, who was ousted two years into his tenure during one of the most brutal macroeconomic periods the luxury goods industry has witnessed in more than a decade.
An accomplished retailer and brand builder, Schulman will take up his job on Wednesday following the surprise announcement by Burberry on Monday morning before markets opened.
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The first-quarter trading statement was issued at the same time as Schulman’s CEO announcement, reflecting the drastic action that Burberry has been forced to take amid the ongoing slowdown in luxury spending; a Chinese cohort that’s in no mood to spend, and the brand’s own troublesome move upmarket at a time of slow growth and high interest rates.
The trading update and CEO switch sent Burberry’s shares plummeting, and they closed down 17 percent at 7.35 pounds on the London Stock Exchange.
Chairman Gerry Murphy called the quarter “disappointing,” and said that if the weakness in luxury demand persists through the second quarter, Burberry will report an operating loss for the first half.
He also suspended dividend payments for the current fiscal year, which should make for a lively AGM on Tuesday in London.
Retail revenue was down 22 percent to 458 million pounds. At constant exchange rates it fell 20 percent. Comparable store sales sank 21 percent in the three months to June 29, compared with an 18 percent increase in the corresponding period last year.
Murphy and Burberry’s board of directors, who welcomed Akeroyd just two years ago, are now pinning their hopes on Schulman, whom they believe can transform Burberry into a brand with broader appeal and a tighter focus on luxury outerwear and soft accessories.
“Josh is a proven leader with an outstanding record of building global luxury brands and driving profitable growth. He has a strong understanding of our brand and shares our ambition to build on Burberry’s unique creative heritage. His extensive experience in luxury and fashion will be key to realizing Burberry’s full potential,” said Murphy.
Schulman to the Rescue
Murphy said the board “didn’t conduct any serious discussions with anybody about replacing Jonathan until very recently,” and then it acted quickly.
“Josh was known to a lot of us at the company, and we’d [originally] been talking to him about a board role,” said Murphy. “As things evolved, it was clear that he was interested in a bigger role and we acted.”
Schulman, who will lead the executive committee and report to Murphy and the board of directors, said he is “deeply honored to join Burberry as CEO. Burberry is an extraordinary luxury brand, quintessentially British, equal parts heritage and innovation. Its original purpose to protect people from the weather is more relevant than ever.”
The executive said he’s looking forward to working alongside Burberry’s creative director Daniel Lee and the teams “to drive global growth, delight our customers, and write the next chapter of the Burberry story.”
Murphy stressed that Lee will remain at the company. “He is not going anywhere. He is looking forward to working with Josh. They’ve already spoken and will meet later this week. There is no change in terms of creative leadership,” he said.
Schulman is a well-rounded retail leader known for building brands and restoring them to health. His appointment as CEO marks his return to the industry after two years, following his exit from Capri Holdings. He is returning to the U.K., 12 years after leaving Jimmy Choo.
Most recently, Schulman was head of the Michael Kors brand at Capri Holdings and was set to become Capri’s CEO, succeeding John Idol.
But then, in a surprise move, Idol stayed on and Schulman exited with a multimillion-dollar separation agreement.
Before joining Capri, Schulman served as CEO of Coach. Prior to his arrival, the brand had been struggling and revenues had been shrinking for several years. Schulman restored it to quality growth and made market share gains, moves that won him plaudits in the financial community.
Luxury executives have described him as strategic, organized, methodical, and focused on execution.
He’s also a lateral thinker. During his pre-Coach days as president of Bergdorf Goodman, Schulman brought in some unexpected labels such as Vetements, Off-White and Fenty by Puma while maintaining the store’s luxury offer, which included Chanel, Valentino and Goyard.
During his five years as CEO of Jimmy Choo, he transformed the business from a niche player into a multimillion-dollar global luxury brand, doubling the store count, entering new categories, and taking control of the Japanese and Hong Kong businesses before selling it to Labelux in 2011 for 500 million pounds.
At Burberry, Schulman’s salary will be 1.2 million pounds a year, and he will be eligible for a target bonus of 100 percent of salary, and a maximum of 200 percent of salary, and a Burberry share plan award of 162.5 percent of salary.
Burberry Won’t Be a ‘British Coach’
Murphy said that under Schulman, Burberry would take “decisive action” to rebalance the offer. It will become “more familiar to Burberry’s core customers while delivering relevant newness,” but under no circumstances will it be transformed into a version of Coach, or lose its luxury positioning, he said repeatedly.
Burberry’s intention is to bring in a “broader, everyday luxury” offer and a more complete assortment across key categories. Going forward, the focus will be on “timeless, classic attributes that Burberry is known for,” Murphy added.
The brand has also vowed to improve customer conversion online with a more edited assortment and better functionality.
“Josh’s background is actually much closer to luxury than anything else, and he’s got a very clear view that Burberry is a true luxury brand and has a spectacular potential in what Jonathan [Akeroyd] coined as ‘modern British luxury.’
“There is no intention of changing that ambition, or of becoming a British Coach. That is not to disparage Coach in any way — it’s just a different business,” Murphy said, adding that Burberry also had zero ambition to become a “British Louis Vuitton.”
Murphy added that Burberry made the leadership change due to a number of factors.
“Our strategy has been quite coherent for a while. But with the benefit of hindsight, in a weak market, we perhaps went a bit too far too fast with a creative transition at a time when customers are feeling a bit more challenged, and a bit more conservative in sampling newness, especially at higher price points,” he said.
He stressed that while Burberry plans to focus on more recognizable, classic items and outerwear, the brand was not changing tack or becoming more mass.
“It’s not about dropping prices. It’s about making sure that we have a product that people want at prices that are acceptable from Burberry,” Murphy said, adding there will be some high price points going forward for merchandise that has “more innovation, design content, and higher-cost materials.
“This is about having a more inclusive and democratic brand, and not about a reversal of strategies. It’s about us rebalancing to ensure that people can get what they want from Burberry,” he added.
Not everyone is convinced.
Bernstein’s Luca Solca wrote that Schulman’s appointment “speaks volumes about how the brand repositioning will work — downward from the recent, relatively abrupt attempt to move the brand
upmarket. Brand power is already damaged by the fact that following the failure of moving up, Burberry has been discounting very heavily.”
By contrast, Neil Saunders, managing director of GlobalData, believes that Schulman will be able to walk the very fine line between luxury and democracy.
He called Schulman’s appointment “interesting” and said the executive “has an extremely firm grip on market realities and an intimate understanding of the luxury space. He also has experience in repositioning brands — such as Coach where, despite some painful moments, he delivered a successful turnaround.
“For the most part, Schulman’s playbook has been about accessible luxury: that fine middle-ground of avoiding ubiquity and cheapness while still allowing a broad base of consumers to buy into a brand. This is a strategy he is likely to use at Burberry and it marks a welcome step change from the unrealistic push to a more rarified and uber-luxury brand position,” Saunders said.
A Tough Start to the Year
In the first quarter, Burberry saw comparable sales decline across all the key regions. Asia Pacific and the Americas were both down by 23 percent, while the Europe, Middle East, India and Africa region fell by 16 percent.
Mainland China was down by 21 percent; South Asia Pacific by 38 percent, and South Korea by 26 percent. Japan was the only Asian country growing, up 6 percent in the period.
The company said that by product, outerwear and scarves continued to perform globally. As reported earlier this year, ready-to-wear sales have underperformed.
In the meantime, Burberry will continue to pursue efficiencies as it seeks to drive up sales. And there are no plans to stop discounting — at least not yet.
Burberry chief financial officer Kate Ferry said that discounting would continue to be part of the strategy. “Outlets are a really important part of our product lifecycle, particularly when it comes to the clearance of end-of-season product. They play an important role, although over time we expect to reduce our exposure to the channel,” she said.
She also confirmed British press reports of imminent layoffs.
She said the company is taking a hard look at its cost base and operational delivery and, as a result, “a few hundred roles globally” would be eliminated, most of them corporate jobs in the U.K. Ferry added that the company is currently in a consultation process with affected staff.
Ferry addressed Burberry’s decision to suspend dividends and emphasized that there were “no liquidity concerns” at the company, which has around a billion pounds at its disposal.
“Clearly we are taking a prudent approach to the dividend until profitability improves and trading picks up,” she said, adding that the decision to withhold dividends “is really about enabling us to invest in the business” until top-line growth returns.
Difficulties Remain
Murphy said Burberry has faced a number of headwinds in its attempts to move upmarket.
“We moved quickly with our creative transition in a luxury market that is proving more challenging than we expected. The weakness of the U.S. market; the deteriorating consumer confidence in mainland China; stability in Europe; as well as the U.K.’s [demise] as a shopping destination have all the headwinds in our creative transition,” he said.
Like many other luxury leaders, Murphy has been outspoken in his criticism of the previous U.K. government, which canceled tax-free shopping for foreigners following Brexit. Sources have said it’s unlikely that the new Labour government will reinstate the tax perk for big-spending shoppers.
He said the share price, which has fallen nearly 60 percent over the past year and 30 percent in the past six months alone, is responding to weak current trading.
“We acknowledge our results are disappointing, but we’ve got all the plans in place to improve that and we don’t think the share price today reflects the underlying value of business in any way,” Murphy said.
Things Can Only Get Better
Murphy said that all of Burberry’s moves, including cost savings, should “start to deliver an improvement in our second half, and to strengthen our competitive position and underpin long-term growth.”
He was also upbeat about the company’s short- and medium-term prospects, and said that once Burberry tweaks its strategy and the macro-economic backdrop improves, especially in China, the company should be well on its way to recovery.
“We expect to see an improvement in trading in the second half,” said Murphy, adding that while China may be “showing relative weakness,” now the fundamentals in the medium term are very good.
“Once we see more stability in the macro environment, the stock market and the real estate environment, we expect a stabilization of demand and recovery in China, not least in mainland China, but also across from the Chinese community as they reengage with global travel following the pandemic,” he said.
Farewell to Jonathan Akeroyd
Schulman’s appointment closes a very short chapter for Akeroyd, who joined Burberry in 2022 from Versace, which belongs to Capri Holdings. Prior to joining Versace, Akeroyd served as CEO of Alexander McQueen after having begun his career at Harrods.
Less than two years ago, Akeroyd set out his plan to move Burberry further upmarket to compete with brands such as Dior, Louis Vuitton and Gucci.
He projected revenue growth of 4 billion pounds in the medium term, and 5 billion pounds in the long term, at constant exchange rates, and with “good” margin progression.
His new vision included “a refocus on Britishness,” doubling the sales of leather goods, shoes and women’s ready to wear, and growing outerwear by 50 percent in the medium term.
Another of Akeroyd’s ambitions was to grow accessories to more than 50 percent of group sales in the medium term.
Those plans came with hefty price tags: 2,000 pounds for the medium Rocking Horse shoulder bag; 2,000 pounds for a Long Gabardine Trench Coat, and 690 pounds for a pair of Check Knit Box sneakers.
While those prices may seem normal in the luxury goods business, they have been shocking to many longtime British customers and non-fashion institutional investors, who view Burberry as a heritage brand that should be growing through sales of accessibly priced, classic merchandise.
Akeroyd was also counting on Lee — whose bags and accessories were a runaway success at Bottega Veneta — to deliver a string of bestsellers, but they have yet to materialize.
Akeroyd’s strategy might have been successful at another point in time, but with China (historically, one of Burberry’s biggest markets) still cautious about spending, and U.S. demand tepid, his plan only dented the share price and stymied sales.
On Monday, Murphy thanked Akeroyd for the contribution he made to the company. “Jonathan has set out a clear strategy for growth that we will build on,” he said.
Akeroyd will not be eligible for a bonus for the current financial year, and all unvested share awards will lapse in full.
It will now be up to Schulman, Burberry’s fourth CEO in seven years, to reposition the brand for profitable growth, unfreeze the dividend payments, and restore the brand to its former glory as a top purveyor of outerwear.
