Victoria Secret Models Can’t Save This Fashion Stock From Runway Disaster After Today’s 18%+ Drop

Burberry just had a Monday that will make your worst day look like a walk in the park. Shares opened the trading session with intentions of winning in “how low can you go”, plummeting over 18% after a disastrous first quarter.

The 168-year-old British fashion icon announced that if business doesn’t pick up soon, they expect to lose money in the first half of the year and make way less profit for the full year than anyone had hoped. 

Things are getting so bad, they decided to stop paying dividends and brought in Joshua Schulman, formerly of Michael Kors and Coach, to mop up this designer disaster. Jonathan Akeroyd, who’d been running the show since April 2022, got the boot “immediately.”

Gerry Murphy, Burberry’s Chairman, didn’t mince words, calling the first quarter performance “disappointing.” He said, “The slump we saw coming into the new year has only gotten worse. If this keeps up, we’re looking at losses for the first half of the year.” Basically, they walked out on the runway and broke their leg on top of having a wardrobe malfunction.

Murphy added, “With the way things are going, we’re suspending dividend payments for the year. But we think our current actions, like cutting costs, will help turn things around in the second half and put us in a stronger position for long-term growth.” Fingers crossed, right?

The numbers aren’t pretty: store sales dropped 21% in the 12 weeks leading up to June 29, with total retail revenue at $600,980,000. Regionally, sales fell 16% in Europe, the Middle East, India, and Africa, and a hefty 23% in both the Asia Pacific and Americas. It’s like their customers decided to go on a collective shopping strike.

Analysts Piral Dadhania and Richard Chamberlain from RBC said the results were “even worse than the already lowered expectations.” They noted, “Right now, the Burberry brand is losing steam, and they need to fix this quickly to avoid losing more market share.” In simpler terms, Burberry’s brand is sinking faster than a lead balloon.

Burberry’s been struggling because luxury shoppers are dropping off the face of the earth. People in Europe and the U.S. are dealing with soaring living costs, while economic jitters are giving Asian consumers the spending sweats. Burberry sheepishly admitted, “We’re facing slower luxury demand everywhere due to economic uncertainties affecting all key regions.” It’s like they’re trying to sell designer sunglasses in a world that suddenly went blind.

To win back customers, Burberry plans to focus more on “everyday luxury” items, refresh their brand communication, revamp their website, and cut costs. Because nothing says luxury like a good bargain, right?

Known for its trench coats, bags, and the famous “Burberry check,” the company has been trying to become more upscale for years. Akeroyd, who previously worked at Versace and Alexander McQueen, took over in 2021, following Marco Gobbetti, who started a five-year turnaround plan in 2017. Clearly, but turning this ship around is going to take a lot more than a bunch of Victoria Secret models carrying around their purses.

(Source: Burberry)

With Burberry’s stock down 66% of the last 5 years, one thing’s for certain, unless Jerome Powell turns up the money printers, this company is headed for bankruptcy.

Stock.News does not have positions in companies mentioned.