Shares in the British luxury fashion brand Burberry (BRBY) are down 16.4% after the luxury brand issued a profit warning and suspended its dividend.
The company, renowned for its iconic camel trench coats, has subsequently replaced chief executive Jonathan Akeroyd. At the opening of trading this morning, shares in the company, which is a constituent of the FTSE 100 index, fell 16.73%. They are currently down 16.4%, and are down 47% since the beginning of the year.
Akeroyd will now be replaced by Joshua Schulman, who was formerly the chief executive of luxury bag and shoe brands Coach and Jimmy Choo. Akeroyd has been in post for just two years. Schulamn said he was "deeply honoured" to take the helm of the company.
"Burberry is an extraordinary luxury brand, quintessentially British, equal parts heritage and innovation," he said.
Why is Burberry's Share Price Down so Much?
Burberry is among the luxury retailers experiencing a slowdown in sales amid a wider contraction in certain areas of luxury spending across the world.
The British brand's sales in the Asia Pacific Region dropped 23%, while sales in mainland China and the Americas also fell 21% and 23%, respectively.
In Europe today, Zurich-listed watch maker Swatch (SWGAY) suffered a 10% share price fall after it revealed a 70% drop in operating profits in the first six months of 2024. The company owns iconic watch brands like Omega and Blancpain.
The Morningstar View
For Jelena Sokolova, senior equity analyst at Morningstar, Burberry's sales revenue, which is down 21% in the three months to the 29th of June, looks "weak."
However, she feels the replacement of Akeroyd with Schulman could "signal a pivot towards a more affordable direction" for the brand.
Performance in the luxury space has been a mixed bag. Gucci owner Kering (KER) may have found it increasingly challenging to reboot Gucc's popularity as a luxury label. Hermès, (RMS) which makes Birkin bags, however, is enjoying a jump in quarterly revenues.
Key Morningstar Metrics For Burberry
• Morningstar Fair Value Estimate: £157.00
• Morningstar Star Rating: ★★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High