Burberry is to cut 500 jobs after global coronavirus lockdowns sparked a sales collapse, the British luxury fashion group said Wednesday.
Sales tanked 45 percent to £257 million ($322 million, 283 million euros) in the company’s first quarter, or 13 weeks to June, from a year earlier, Burberry said in a trading update that sent its share price sliding.
Burberry, which generates a large chunk of its turnover from big-spending tourists, including in airports, has been hit hard by the COVID-19 outbreak that shut shops and grounded planes worldwide — but it has seen a turnaround in key market China.
The London-listed group on Wednesday said it was launching a fresh efficiency drive to generate annualised savings of £55 million with a one-off restructuring charge of £45 million.
“In total the changes we are proposing would impact roughly five percent of roles globally, or 500 out of 10,000. This includes the UK,” a Burberry spokeswoman told AFP.
Around 150 office-based jobs were expected to be shed in Britain, where the group employs more than 3,500 people. The remaining roles will be removed overseas, she added.
The measures are in addition to the company’s existing £140-million cost-cutting programme.
– ‘Excellent response’ –
Chief executive Marco Gobbetti conceded that demand would “take time” to recover, despite easing lockdowns and the resumption of air travel.
“In the first quarter, 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,” Gobbetti said.
“We are encouraged by the improving trends in all regions… We saw an excellent response to new product launches in recovering economies as well as online.
“Demand for leather goods was particularly strong in mainland China and Korea, bringing new, younger luxury customers to the brand,” Gobbetti added.
Burberry also warned that the group’s second quarter, which runs to the end of September, would also be “materially impacted” by the coronavirus crisis, with retail sales sliding by between 15 and 20 percent.
“In retail, tourist flows are likely to remain negligible, and store operations are continuing to face significant headwinds, with some remaining closed and operating with reduced trading hours,” the company added.
In late morning deals, Burberry shares dived 6.8 percent to £14.51 on London’s FTSE 100 index, which was 0.8 percent higher at 6,231.77 points.
“It’s something of a mixed picture from Burberry,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
“Overall sales numbers are predictably ugly, but the pace of recovery is faster than we’d expected with a particularly stylish turnaround in mainland China.”