Burberry hands new boss £9.2m ‘golden hello’ to rescue brand
Succession drama shows the fashion house is in denial about its culpability for its current plight
‘It’s about making sure that we have the product that people want at prices that are acceptable to them’
BURBERRY has handed its new chief executive a “golden hello” worth as much as £9.2m to tackle a fashion crisis that has sent its shares plunging to their lowest level in 14 years.
The label suspended its dividend as it issued its third profit warning in months and parted ways with Jonathan Akeroyd after little over two years.
Chairman Gerry Murphy conceded that the performance was “disappointing” as he called on American executive Joshua Schulman to turn around the British brand.
Burberry is handing him a pay package worth as much as £9.2m, including a £1.2m salary, bonuses and a “recruitment share award” worth £3.6m.
The welcome is even more generous than the £6m “golden hello” handed to Mr Akeroyd.
Following his final quarter in charge, Burberry reported that sales had fallen everywhere except Japan in the first quarter, prompting a warning that it will report an operating loss for the first half of the financial year.
Investors marked Burberry down by 17pc to leave it with a valuation of only £2.6bn and on course for relegation from the FTSE 100, which it joined in 2009. The company has lost two thirds of its value in the past year. Mr Akeroyd had sought to take Burberry upmarket with more cutting-edge fashions and higher prices for its famous trench coats and handbags.
The shift has been difficult, however, and Mr Murphy indicated a change of course under Mr Schulman with “decisive action to rebalance our offer to be more familiar to Burberry’s core customers”.
Mr Murphy said the company had gone “too far too fast” in its attempts to take the brand more upmarket and bring more newer products into stores, adding: “It’s not about dropping prices.
“It’s about making sure that we have the product that people want at prices that are acceptable to them. It’s about making Burberry a more inclusive and democratic brand.” Mr Schulman was previously the chief executive of handbag brand Coach and shoe designer Jimmy Choo, where he expanded the number of stores from 55 to 140 across 32 countries.
He also spent eight years at Gucci, including five in Paris with Yves Saint Laurent and three years in New York and Florence as boss of women’s readyto-wear for the Gucci brand. The announcement followed months of speculation over the future of Mr Akeroyd as the company battled to reverse a slump in sales. As recently as six weeks ago, Burberry claimed that he had the full backing of the board.
Mr Akeroyd was brought in alongside Daniel Lee, Burberry’s Bradford-born creative director.
It marked the first time in decades that Burberry had both a home-grown chief executive and creative director, with the company pledging to refocus on the “Britishness” of the brand under their leadership.
Mr Murphy said Mr Schulman was also “absolutely convinced that Burberry’s Britishness is its key distinguishing factor”. He added: “I don’t see the nationality of the CEO as a factor.”
The Burberry chairman, meanwhile, downplayed the prospect of further senior departures, saying Mr Lee will remain with the company.
Burberry revenues were down 22pc for the three months to June 29.
It said it was taking decisive action to try to stem the decline, including a cost-cutting programme to offset the impact of inflation.
The Telegraph revealed earlier this month that Burberry was preparing to cut swathes of jobs in a bid to prop up falling profits.
F‘Burberry’s problems are not temporary, nor are they a function of a weak consumer backdrop’
ashion is notoriously fickle but the speed with which Jonathan Akeroyd, Burberry’s chief executive, has fallen out of favour still comes as a shock.
At least that is if you are inclined to take the company’s recent public statements at face value.
In the space of six short weeks, poor Mr Akeroyd has seemingly gone from king of the catwalk to old hat.
He has been turfed out with immediate effect after the onceillustrious fashion house issued another profit warning and axed its dividend.
After all, it was only at the end of May that Burberry insisted his job was safe after Mr Akeroyd suffered the humiliation of having his bonus cut to zero following another torrid year.
“We don’t comment on unsubstantiated speculation but to be clear Jonathan has the full backing of the Burberry board,” the company told The Telegraph as Mr Akeroyd waved goodbye to a £2.3m payout.
Burberry had been equally vociferous in March following reports in the fashion blog Miss Tweed that chairman Gerry Murphy had begun secretly interviewing candidates to replace someone who had been in the hot seat for just two years.
The company unveiled Mr Akeroyd’s replacement – American Joshua Schulman – on the same day it was announced he was leaving. Either those denials weren’t true or Burberry has pulled off the quickest piece of succession planning of all time.
No prizes for guessing which version this column thinks is more likely.
Whatever the real story, there can be little doubt that blundering Burberry has flip-flopped its way into an existential crisis.
Mr Schulman, who has previously led handbag-maker Coach and Michael Kors, arrives as yet another sharp strategic about-turn and risks being the understatement of the year from a board that is in danger of being as equally out of its depth as the outgoing chief executive.
Performance was merely “disappointing”, Mr Murphy said in the face of overwhelming evidence to the contrary.
Burberry unveiled a sharp drop in sales in every market except Japan and warned it could slump to a loss in the first six months of the year and also fall short of City expectations over the full financial year.
With the company’s shares nosediving as much as 18pc in morning trading, it is clear long-suffering shareholders aren’t falling for that more hopeful version of events.
Nor it seems, are they inclined to believe that the answer is yet more upheaval and another strategic rethink.
Further management change casts Mr Murphy in a poor light.
Burberry may have forgotten how to fashion a hit but it has always been a world beater when it comes to making a succession drama, which has been ongoing since Mr Murphy took over from Sir John Peace six years ago. The board was caught so off guard by the departure in 2021 of Mr Akeroyd’s predecessor, Marco Gobbetti, the luxury goods veteran, that it had failed to line up a successor.
Then a year later, chief designer Riccardo Tisci left along with finance boss Julie Brown.
Dispensing with Mr Murphy’s services may be a step too far at this stage but his record is undeniably unfavourable.
Yet it was clear from the flurry of profit warnings that Mr Akeroyd’s decision to take Burberry more upmarket hadn’t worked.
But how was a strategy of charging customers more during a cost of living crisis for what essentially amounted to the same products signed off in the first place? It is the elephant in the boardroom. Even with Mr Akeroyd gone, the company continues to blame a luxury goods market that it says is proving more challenging than expected, particularly in China where the majority of its well-heeled customers come from.
There is no doubt that others are struggling – Kering has struggled to revive Gucci, the crown jewel in its wardrobe – but Burberry is in denial about the extent of its own self-harm.
Its problems are not solely temporary, nor are they simply a function of a weak consumer backdrop. It smacks of an organisation that is blighted by a much deeper malaise – one that won’t be solved by another game of management musical chairs or shift in direction.
On a call that left some analysts disappointed, Mr Murphy stated repeatedly that there would be no major shift in strategy under Mr Schulman.
“We tempered our excitement” as a result of his protestations, Luca Solca, of Bernstein, said.
Mr Murphy said: “We are taking decisive action to rebalance our offer to be more familiar to Burberry’s core customers.”
It sounds like a muddle, compounding the impression of a company that is unsure of its place in the world and may still not have hit the bottom.
Amid yet more uncertainty and with its shares having more than halved under Mr Akeroyd, the likelihood of Burberry – an outfit described as “sui generis in the context of the UK stock market” by star stock picker Nick Train – falling prey to an opportunistic bid from private equity or a rival seems reasonably high. Again though, Mr Murphy dismisses this.
With the company willing to hand Mr Schulman a truly eye-watering £9m-plus golden hello – £3m more than Mr Akeroyd received just two years ago – it may be tempting to conclude that it has finally landed a first-rate executive capable of fashioning a long overdue turnaround.
A less generous view is that Mr Schulman has demanded danger money.