‘Our best days are ahead’: Burberry CEO reveals turnaround plan
Following the company’s disappointing H2 results, Joshua Schulman presented ‘Burberry Forward’ — a detailed plan that includes a reset of its pricing structure and a renewed focus on the core customer.
BY MALIHA SHOAIB November 14, 2024
Burberry has a new strategy after a string of losses. CEO Joshua Schulman, who
joined in July and succeeded Jonathan Akeroyd, has unveiled ‘Burberry Forward’, a plan to bring the brand back to where it was two years ago with a focus on outerwear and a more diversified pricing structure.
Burberry will still be a luxury brand, Schulman insists — not accessible luxury (there were calls
earlier this year for the brand to become a “British Coach”).
“Burberry shares all of the attributes that best-in-class luxury brands have,” said Schulman during a presentation at the temporary Burberry offices in London on Thursday (the permanent office space is currently undergoing a renovation). “Luxury customers of all ages crave legitimacy, authenticity and enduring quality. In this context, Burberry is more relevant than ever. [But] over the past several years, the world went where Burberry has always been while we went somewhere else.”
He presented the strategy as Burberry reported its financial results for the first half of fiscal 2025. Revenues were down 20 per cent at current exchange rates to £1.1 billion. The company swung to an operating loss of £53 million in H1, and finished the period with net debt of £1.4 billion. Gross margin declined from 69.8 per cent last year to 63.4 per cent after price increases failed to offset product costs, CFO Kate Ferry explained during the presentation.
The company has not laid out a sales outlook for 2025 yet, but the long-term ambition is to return to £3 billion in sales with a high-teens operating margin and a 70 per cent gross margin.
Burberry has been in transition since former CEO Marco Gobbetti — who had led an elevation strategy — departed in 2021. Akeroyd, who joined in 2022, set off with a mission to align Burberry more closely to its British heritage, and had a long-term target of £5 billion in revenue. But Burberry’s performance has been slipping over the past year and a half. It issued a profit warning in
January 2024 and later reported that
sales fell 4 per cent in fiscal year 2024. Its share price has been falling since mid 2023, dropping from £25.94 in April 2023 to £5.92 in September 2024, when it
fell from the FTSE 100. Since Schulman revealed his strategy on Thursday morning, shares have jumped over 19 per cent.
“We are operating in a difficult market, however, our underperformance is also a consequence of the decisions we have taken,” Schulman said during the presentation. “It stems from an inconsistent brand execution and a lack of focus on our core outerwear category and our core customer segments. We are acting with urgency to course correct.”
Retail sales were down 19 per cent during H1, while wholesale was down 29 per cent due to weaker consumer demand and a planned reduction in EMEIA (Europe, the Middle East, India and Africa). Licensing sales were up 5 per cent thanks to success in fragrance.
APAC sales dropped 25 per cent year-on-year in H1 and have worsened from Q1 to Q2 this year — Mainland China has suffered as expected, as has South Korea (down 26 per cent in H1). Japan’s growth has slowed, with sales dropping 2 per cent year-on-year. EMEIA was down 13 per cent year-on-year, but sales have improved from a 16 per cent decline in Q1 to a 10 per cent decline in Q2. The Americas have also improved, from a 23 per cent drop in Q1 to an 18 per cent decline in Q2 (sales are down 21 per cent in H1 year-on-year). American tourist spend has been performing better than local spend, the brand said.
Ferry is undertaking a strict cost-cutting strategy (which has included layoffs) and has already delivered £8 million in structural savings from her efficiency programme in the first half of the fiscal year. Consumer-facing spending such as marketing will remain a priority. For Schulman, who previously served as CEO of Michael Kors and, before that, Coach, the key to success is in bringing together the design, marketing and merchandising teams and in “loving the customer we have as much as the customer we want to have”.
The new pricing structure
The main change that Schulman is making is around Burberry’s pricing structure. In the past two years, Burberry has been pursuing an elevation strategy that has centred on pricey leather goods, and Schulman was transparent that the strategy “didn’t work” — as reflected in the sales figures. Outerwear and soft goods (which includes scarves) performed better than average in all key regions in H1. Ready-to-wear performed in line with the group average, while leather goods and shoes underperformed.
“We took pricing too high across the board, particularly on leather goods.”
“We wandered off too far in our pivot to a modern British luxury aesthetic. We over-indexed on modern at the exclusion of our heritage in our brand expression. We created new brand codes, including variations of signifiers and word marks that were not familiar or recognisable to our customers,” said Schulman. “We took pricing too high across the board, particularly on leather goods.”
His new strategy brings pricing back in line with what it used to be: handbag prices will sit among the £1,500 to £2,000 range rather than over £2,000, instead stretching pricing and elevation across the categories where the brand has more authority — namely, outerwear and scarves.
Aside from the pricing strategy, Schulman highlighted that outerwear and scarves will be pushed to the most prominent positions within stores. No more scarves hidden in drawers and left out of marketing campaigns; instead, Burberry has introduced a ‘Scarf Bar’ at its New York flagship and plans to roll that out to other locations, alongside its new campaign (“It’s always Burberry weather”) featuring scarves-a-plenty.
Schulman describes the pricing architecture as “good, better, best”, which indicates the lowest, middle and highest prices. In outerwear, “best” pricing will represent around 20 per cent, while “better” and “good” will represent around 40 per cent each. In the other categories — ready-to-wear, bags and shoes — “best” will represent just 5 to 15 per cent.
In terms of discounting, Burberry is currently dealing with a “significant inventory overhang”, according to Schulman, so it plans to use outlets to clear excess stock. After that, it will tighten up its buy and inventory, then roll back on outlet exposure to drive margins up.
Speaking to the core customer
Schulman identified five customer archetypes: the opinionated customer, who is fashion-forward; the investor, who is high spending and invests in quality products; the conservative, who spends a little less than the investor but also seeks quality; the hedonist, who appreciates the brand and seeks self-expression; and the aspirational customer, who is lower spending and often wants branded products.
The problem in recent years has been that the opinionated fashion-forward customer has been the only focus, while others have been pushed to the sidelines. “We prioritised inventory and marketing investments around seasonal fashion moments at the expense of our core categories, resulting in diminished visibility of our core outerwear, and we took pricing too high across the board, particularly on leather goods where we lacked natural category authority,” said Schulman. “These changes were designed to appeal to a fashion-forward customer, and although this audience can be very influential, the narrowness of our target confuses a large and important cross section of our core customers.”
The brand wants to maintain that style-oriented audience, but right now, the focus is on the investor and the hedonist — who will inspire the conservative and the aspiring customer, respectively.
Despite that, Schulman was clear that creative director Daniel Lee isn’t going anywhere for now. “When I arrived at Burberry, I noticed that the design function was relatively independent and much more siloed than it is in better performing luxury businesses,” he said. “I’ve made it a priority to bring design back closer to the commercial anchors of the business. We have built a forum, enabling Daniel, myself and our merchandising and marketing leaders to align earlier on product and marketing decisions that impact our global business.”
Schulman was confident in his turnaround plan, as well as Burberry’s future. “I am more optimistic than ever that Burberry has all of the attributes to be one of the best in class here, but our starting point is from a very challenging place,” he added. “Burberry’s best days are ahead.”
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