Burberry, the iconic British luxury fashion brand, has announced plans to cut approximately 1,700 jobs globally by 2027 as part of a cost-reduction strategy following a significant decline in profits. The company reported a staggering £66 million loss for the last financial year, prompting a reevaluation of its operational structure.

Key Takeaways

• Burberry plans to cut 1,700 jobs, nearly 20% of its workforce.
• The job cuts will primarily affect head office roles and the night shift at its Castleford factory.
• The company aims to save £60 million in costs by 2027, building on a previous £40 million savings initiative.
• Burberry’s profits fell by 117%, highlighting challenges in the luxury goods market.

Financial Overview

Burberry’s financial struggles have been exacerbated by a broader downturn in the luxury goods sector, with the company experiencing a 15% drop in underlying sales, totaling £2.5 billion for the year ending March 29. The luxury market has faced challenges due to reduced consumer spending, particularly among Chinese tourists and in the U.S. market.

The company’s chief executive, Joshua Schulman, who took the helm last year, emphasized the need for these cuts to ensure the brand’s sustainability and future growth. He stated, "For a long time, we have had overcapacity at that facility, and that’s simply not sustainable at this point."

Job Cuts and Their Impact

The planned job reductions will primarily target:

• Head Office Roles: Most of the cuts will occur in Burberry’s global head offices, particularly in London.
• Castleford Factory: The night shift at the Castleford factory, known for producing the brand’s signature trench coats, will be eliminated, affecting around 170 skilled jobs.

Despite these cuts, Schulman assured that no significant store closures are planned, and the company intends to invest in renovating the Castleford factory later this year.

Strategic Shift

Burberry’s recent challenges have prompted a strategic shift back to its core strengths, focusing on its heritage products like trench coats and scarves. Schulman noted that the brand aims to transition from "modern British luxury to timeless British luxury," indicating a return to the brand’s roots.

The company has also faced criticism for its previous attempts to upscale its offerings without success. Analysts suggest that the new direction under Schulman could help restore Burberry’s reputation and market position.

Market Reaction

Following the announcement of the job cuts and the cost-saving measures, Burberry’s shares surged by 18%, reflecting investor optimism about the company’s turnaround strategy. Analysts believe that the combination of improved sales and reduced costs could lead to significant profit growth in the coming years.

Conclusion

As Burberry navigates through these turbulent times, the focus remains on restructuring and revitalizing the brand. The job cuts, while painful, are seen as necessary steps to ensure the long-term viability of this storied fashion house. With a renewed emphasis on its classic offerings and a commitment to operational efficiency, Burberry aims to reclaim its status in the competitive luxury market.

Sources

• Burberry may cut 1,700 jobs globally to reduce costs as profits fall | Burberry group, The Guardian.
• Burberry to cut 1,700 jobs as designer suffers heavy losses, BBC.
• Burberry to cut 20% of global workforce, shares jump, Reuters.