Coronavirus: Burberry to cut hundreds of jobs as crisis inflicts ‘severe impact’ on sales
Burberry has announced plans to cut hundreds of jobs as the luxury brand plots a fightback from a collapse in sales at the height of the coronavirus crisis.
The company said that 150 UK office roles were at risk as it seeks savings “to reinvest in customer facing activities” – with a further 350 jobs called into question across its store operations overseas.
London-based Burberry said it had begun consultations with affected UK staff and it hoped to minimise redundancies elsewhere through redeployment, where possible, as part of efforts to save an additional £55m per year.
Its first quarter trading statement demonstrated that luxury brands – and their customers – are not immune from the effects of the COVID-19 pandemic which has wreaked havoc on earnings and jobs across the retail sector.
In addition to lockdowns across its trading territories over the course of this year, it pointed to particular pressure on sales from the lack of international travel which has hit its usually strong tourism revenue.
Chief financial officer Julie Brown told a conference call with journalists that store visits in the UK were lagging in its biggest markets because social distancing restrictions were lifted later.
Burberry only had 40% of its entire trading estate open at the start of the three months to 27 June quarter – reaching 50% at the end of the period.
It revealed a 45% plunge in like-for-like retail sales with total retail revenue 49% down on the same quarter last year.
The company warned the outlook for the current second quarter of its financial year largely depended on government action to ease lockdowns and travel restrictions globally – with sales expected to be “materially impacted”.
Shares closed 5.6% lower on Wednesday following the update.
Chief executive Marco Gobbetti told investors: “Sales were severely impacted by the drop in luxury demand from COVID-19 and we expect it will take time to return to pre-crisis levels with the resumption of overseas travel.”
He added: “As we enter the second phase of our strategy, we are sharpening our focus on product and making other organisational changes to increase our agility and generate structural savings that we will be able to reinvest into
consumer-facing activities to further strengthen our luxury positioning.”
Chris Beckett, head of equity research at Quilter Cheviot, said the headline sales figures were a disappointment.
He added: “Burberry still has its attractions as a unique stock in the UK market longer term, but currently comparisons in an international context are not favourable.
“We are, however, encouraged by the Chinese consumers’ response to the brand’s new collections, particularly in leather goods.”