Burberry Group Plc said it will cut 500 jobs globally to cut costs after lockdowns caused sales to plunge by almost half in the past quarter.
The British fashion house said comparable retail sales fell 45 percent in the quarter and predicted that the pandemic will continue to hurt performance in the current period. COVID-19 prompted luxury boutiques to shut around the world, and in some markets consumers are only now venturing back onto shopping streets.
Burberry shares fell as much as 6.7 percent early Wednesday in London.
The job cuts include 150 office positions in the UK, or about 4 percent of the company’s headcount in Britain. Burberry currently employs about 10,000 worldwide. The luxury brand also plans 55 million pounds ($69 million) in new savings on top of a previous 140 million-pound target. Bloomberg News reported on Tuesday that Burberry planned a reorganization that would include job cuts in the head office.
The company behind the iconic trenchcoat announced last week that it would consolidate its offerings around ready-to-wear, accessories and shoes as it aims to elevate the quality of its products while becoming more agile. The reorganization is part of a plan put in place by Chief Executive Officer Marco Gobbetti, whose urgency has grown with the onset of the coronavirus pandemic.
“We’re putting further focus on the products with the reorganization changes announced last week,” Julie Brown, chief financial officer, said during a call with journalists on Wednesday. The job cuts in the UK will not impact retail or manufacturing teams, she said.
Outside the UK, the roles affected will be office-based, but there will be an “element of retail efficiency, she said.
The pandemic has hit Burberry’s turnaround plans after the company hired designer Riccardo Tisci, formerly of French fashion house Givenchy, in 2018. With Tisci, Burberry has been trying to woo millennials and younger shoppers, adding to its accessories line and trying to move its image upmarket.
Burberry, along with the broader luxury industry, faces a challenge: The majority of the industry’s sales rely on physical stores. The lessons from the lockdowns are set to accelerate a digital shift to get more customers to spend that way.
The company didn’t provide a full-year guidance but expects the current quarter ending September will “continue to be materially impacted by the pandemic.”
The stock has lost 33 percent of its value this year.