Burberry Announces 18% Workforce Cut, 60 Million Pound Savings Plan

Burberry, the iconic British luxury brand, has announced a significant restructuring plan following a challenging fourth quarter. The company reported a decline in sales, which, while less severe than anticipated, still marked a downturn. The adjusted operating profit for the full year reached 26 million pounds, exceeding market expectations but falling short of the previous year's 418 million pounds.

The company has decided to implement a series of organizational changes, including a global workforce reduction of approximately 1,700 employees, which is about 18% of its total workforce. This move is part of a broader cost-cutting strategy aimed at improving financial performance. The restructuring plan, which is expected to be completed by 2027, includes measures to reduce costs in procurement and real estate, with an estimated savings of 60 million pounds. This initiative follows a previous cost-cutting plan announced in November, which targeted 40 million pounds in savings, bringing the total cost reduction to 100 million pounds.

The sales decline was observed across all regions, with the Asia-Pacific area showing the most significant weakness. The company attributed this performance to the uncertain macroeconomic environment, exacerbated by geopolitical tensions. While specific details on the impact of U.S. tariffs were not provided, the company acknowledged that increased geopolitical risks could lead to higher tariff-related costs.

Burberry's CEO, Joshua Schulman, has been leading the company's efforts to revitalize the brand. The recent cost-cutting measures and workforce reduction are part of a broader strategy to enhance operational efficiency and financial stability. The company's focus on cost management and strategic restructuring reflects its commitment to navigating the current economic challenges and positioning itself for future growth.

Schulman has been working to enhance the appeal of Burberry's classic trench coat, including the iconic piece priced around 2,000 pounds. He has also indicated a shift in focus away from handbags, which are not considered core to the Burberry brand. The company has partnered with British celebrities such as Kate Winslet and Jerry Hall to attract a broader and more global customer base through advertising campaigns.

The company's cost-cutting plan includes reducing expenses in procurement and real estate, with the aim of saving 60 million pounds over the next two years. The workforce reduction will be conducted through consultations where appropriate, and the one-time costs associated with these layoffs are expected to total around 80 million pounds, primarily paid in cash.

Burberry's challenges are not new; the company had previously reduced its workforce by 500 employees in 2020 due to decreased demand for luxury goods during the global pandemic. The current restructuring efforts are aimed at addressing the ongoing economic uncertainties and the brand's waning appeal among consumers, who have shown less interest in Burberry's designs amidst the cost-of-living crisis.