Burberry, the iconic British fashion house known for its signature trench coats and distinctive check scarves, has announced a £40 million cost-cutting program as part of a broader strategy to stabilize its business.
The turnaround plan, spearheaded by new CEO Joshua Schulman, is aimed at reviving the fortunes of the brand after a period of underperformance and declining sales.
Schulman’s Strategy: Back to Basics with Core Collections
Joshua Schulman, who took the helm in July after the departure of former CEO Jonathan Akeroyd, is moving swiftly to implement changes.
Schulman, previously head of Coach, emphasized the importance of returning to Burberry’s roots, focusing on “timeless core collections” and key product lines such as outerwear and accessories.
He cited a drift away from the brand’s heritage as a key reason for its recent struggles.
Schulman said:
“In my first 90 days, I’ve made it a priority to address the challenges facing Burberry,”
“We are acting with urgency to course correct, stabilize the business, and position Burberry for sustainable, profitable growth.”
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Cost-Cutting Plan and Potential Job Losses
As part of the turnaround plan, Burberry aims to trim £40 million from its annual cost base, with around £25 million of savings expected to be realized during the 2025 financial year.
While the company did not disclose specific details about potential job cuts, Schulman noted the streamlining efforts would primarily target office-based roles, including those at the head office.
Kate Ferry, Burberry’s chief financial officer, acknowledged that the company faces additional financial pressures, including increased national insurance contributions due to recent changes in the UK budget.
This could add another £3-4 billion to Burberry’s overall costs.
Ferry said:
“Clearly, this has been a hit for all businesses based in the UK, but we are committed to managing it effectively,”
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Burberry’s Bold Move: Launch of ‘Scarf Bars’
In an effort to reignite consumer interest and enhance the in-store experience, Schulman announced the launch of a new campaign titled “It’s Always Burberry Weather.”
A key component of this initiative is the introduction of “scarf bars,” where customers can personalize and purchase Burberry’s iconic check scarves. The rollout will begin at the flagship store on 57th Street in New York, with plans to expand globally if successful.
Schulman believes the new campaign will help reconnect with Burberry’s loyal customer base while attracting new clients who value personalized luxury experiences.
Schulman said:
“We have a powerful brand with broad appeal among luxury customers, and our authority in the outerwear and scarf categories remains strong,”
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Rumors of a Moncler Takeover
Amid speculation about a potential takeover bid by Italian rival Moncler, Schulman declined to comment directly but highlighted the advantages of remaining an independent luxury brand.
He said:
“We have a lot of opportunity ahead, and there’s a lot more that we can do as a public company.”
The speculation around a takeover reflects broader trends in the luxury market, where consolidation has become more common as brands seek to strengthen their market positions.
However, Schulman’s focus appears to be on executing his turnaround plan and steering Burberry towards long-term growth.
Financial Challenges: Burberry’s Struggles with Profitability
Burberry’s financial troubles have been exacerbated by a slowdown in the luxury market, affecting not just Burberry but also competitors like Kering, the parent company of Gucci and Balenciaga, and Mulberry.
The company issued two profit warnings this year and reported a £41 million loss for the six months ending in September, a stark contrast to the £223 million adjusted operating profit from the same period last year.
Revenues also fell by 22 percent to just under £1.1 billion.
Schulman acknowledged that the company’s previous strategy had contributed to its recent setbacks.
He said:
“Our underperformance stemmed from inconsistent brand execution and a lack of focus on our core outerwear category and core customer segment.”
“Today, we are acting decisively to address these issues.”
Short-Term Outlook and Long-Term Vision
While Schulman’s plan aims to revitalize the brand, he cautioned that the turnaround would take time, particularly given the uncertain macroeconomic environment and the all-important festive trading period ahead.
A statement from Burberry said:
“It is too early to determine whether our second-half results will fully offset the first-half adjusted operating loss.”
Despite the short-term challenges, Schulman expressed confidence in the brand’s future.
He outlined a clear framework for improving brand performance, reigniting consumer desire, and driving long-term value creation.
He said:
“Building on our strong foundations, I am confident that Burberry’s best days are ahead.”
Market Reaction: Shares Surge Following Turnaround Announcement
Investors reacted positively to Schulman’s cost-cutting plan and strategic vision.
Burberry shares jumped nearly 19 percent on the day of the announcement, marking the brand’s biggest single-day rise in at least two decades.
The surge made Burberry the top riser on the FTSE 250 index, signaling renewed investor confidence in the company’s ability to navigate its turnaround.
Analysts have noted that while the cost-cutting measures are a positive step, the success of Schulman’s plan will ultimately depend on the brand’s ability to execute its strategy effectively and reconnect with its core customer base.
Looking Ahead: Can Schulman Deliver a Lasting Turnaround?
Burberry’s new CEO has laid out an ambitious plan to stabilize the business and return the brand to its heritage of timeless fashion.
The focus on core products like trench coats and scarves, coupled with innovative retail concepts like the “scarf bar,” reflects a strategic pivot aimed at regaining lost market share.
However, the turnaround won’t be immediate. The luxury market remains volatile, and Burberry will need to navigate economic uncertainties while delivering consistent brand execution.
If successful, Schulman’s vision could mark a new chapter for the storied British brand, positioning it for sustained growth and profitability.
