Burberry’s new CEO, Joshua Schulman, faces a tough challenge in reversing the fortunes of the British luxury brand, which has seen a significant decline in sales and a 40% drop in its share price this year, fueling speculation about a potential takeover.
While the broader luxury sector has struggled amid rising interest rates and inflation, which have dampened consumer spending, Burberry has underperformed relative to its competitors.
However, its stock rose on Monday after reports surfaced that Italy’s Moncler was considering making an offer. Both companies declined to comment on the speculation.
Schulman, who is the fourth CEO in a decade, previously led Coach and Michael Kors, and is expected to unveil a new strategic direction for Burberry when the company reports its half-year results on November 14.
Some analysts and investors believe Burberry’s 56 outlet stores should be a top priority for Schulman, as they may undermine efforts to position the brand more firmly in the high-end luxury market.
Burberry’s outlet stores, located in China, Japan, the UK, and the US, are used to offload excess inventory and offer older collections—such as its signature trench coats, check-patterned scarves, and bags—at deep discounts.
“Burberry has been trying to elevate the brand, but the outlet exposure risks undermining this strategy,” said HSBC analyst Aurelie Husson-Dumoutier.
“Why wouldn’t I buy a 2019 trench coat at half the price if it looks almost the same as the 2024 version?” she added.
Reducing its reliance on outlet stores would be a costly move for Burberry, as these locations represent nearly 30% of sales and contribute about 50% of its profitability, according to HSBC estimates.
However, analysts argue that such a shift could be necessary if the brand is aiming to reposition itself at the higher end of the luxury market, which could, in turn, lead to a higher valuation for its shares.
“If Burberry were to follow a premium brand strategy, like Coach, the price-to-earnings multiple the market assigns to those brands is often half that of true luxury players,” said Bank of America analyst Ashley Wallace. “The challenge is that Burberry is currently stuck in the middle.”
Over the past decade, Burberry has undergone frequent changes in leadership, with three different creative directors in the past seven years—Christopher Bailey, Riccardo Tisci, and now Daniel Lee—each introducing new styles, logos, and fonts, which some critics say have muddied the brand’s identity.
Lee, who joined Burberry two years ago, made a name for himself at Bottega Veneta with his highly successful “it” shoes and bags, such as the £3,140 ($4,071) “Jodie,” which reimagined the brand’s signature woven leather and resonated with Gen Z shoppers.
However, Lee’s designs for Burberry have yet to achieve the same level of success, and speculation about his future at the company has been growing. Burberry Chairman Gerry Murphy reassured analysts in July that they “should not assume any change in creative leadership.”
Sasha Kachanova, a consumer analyst at asset manager abrdn, pointed out that Burberry is more renowned for its apparel than for its leather goods, suggesting that it may take longer for the brand to produce a viral handbag or shoe.
