Burberry’s New CEO Takes the Reins Burberry’s new CEO, Joshua Schulman, is set to outline his strategy on November 14, facing significant challenges to revive the British luxury brand amid declining sales and a 40% drop in its share price this year. The company, lagging behind its industry peers, has become a potential takeover target, with recent speculation involving a bid from Moncler, though both firms declined to comment.

Schulman, who previously led Coach and Michael Kors, is Burberry’s fourth CEO in a decade. He is tasked with navigating a challenging market impacted by high interest rates and inflation, which have dampened consumer spending. Analysts suggest that a key focus for Schulman should be the company’s network of approximately 56 outlet stores in regions including China, Japan, the UK, and the US. While these outlets help offload surplus stock and sell past collections at substantial discounts, they may conflict with Burberry’s attempts to position itself as a more exclusive luxury brand.

According to HSBC analyst Aurelie Husson-Dumoutier, Burberry’s outlet strategy undermines its premium branding efforts, as customers may opt for discounted items that resemble current collections. Reducing outlet store reliance would be expensive, as these stores account for nearly 30% of revenue and 50% of profitability, but could align with a push towards higher luxury status and potentially raise the brand’s valuation.

Currently, Burberry sits in an ambiguous position within the luxury market, unlike brands that command higher valuations due to clearer premium positioning, notes Bank of America’s Ashley Wallace. Burberry has also seen frequent leadership changes, including three creative directors in seven years—Christopher Bailey, Riccardo Tisci, and currently Daniel Lee—resulting in varied styles that some argue have muddled the brand’s identity.

Burberry’s New CEO Takes the Reins Lee, who gained prominence at Bottega Veneta with popular items like the “Jodie” woven leather bag, has not yet replicated that success at Burberry. Speculation about his future persists, though Burberry Chairman Gerry Murphy indicated in July that no leadership changes should be assumed.

Burberry’s reputation for apparel rather than leather goods may slow the path to producing a hit accessory, according to Sasha Kachanova, a consumer analyst at abrdn. Tom Delic of Momentum, an investor in Burberry, believes the brand should refocus on its classic product lines. Delic and others have also raised concerns about the company’s rapid price hikes, which could alienate younger, aspirational consumers.

Shoppers like 26-year-old Kishica Arora, who found appealing discounts at Burberry’s Hackney outlet, confirm this sentiment. While she appreciated the deals on basics like T-shirts with the brand’s signature plaid, she expressed reluctance to pay full price, preferring trendier brands like Jacquemus.

Burberry’s New CEO Takes the Reins  Burberry Group’s stock dropped as much as 6% to 800 pence, with traders expressing skepticism over the likelihood of Moncler making a takeover bid for the British luxury brand. The previous day, Burberry shares had risen by 4.8% following media reports suggesting Moncler might be interested in a bid.

By 12:35 p.m., Burberry’s shares had fallen 6.1% to session lows, pushing its year-to-date decline to approximately 43%. Meanwhile, Moncler’s stock also slipped, down by 1.31%.

Burberry’s New CEO Takes the Reins  Burberry’s new CEO, Joshua Schulman, faces significant challenges in revitalizing the British luxury brand, which has experienced a sharp decline in sales and a 40% drop in its stock price this year, sparking takeover rumors. The luxury sector has generally struggled due to high interest rates and inflation curbing consumer spending, but Burberry has fared worse than many competitors.

The company’s shares rose 4.8% on Monday amid reports that Italian luxury firm Moncler was considering a bid, although neither company commented. Schulman, previously the CEO of Coach and Michael Kors and Burberry’s fourth CEO in a decade, is set to unveil a new strategy on November 14 during the brand’s half-year financial results.

Analysts believe Schulman should prioritize addressing Burberry’s network of about 56 outlet stores spread across China, Japan, the UK, and the US. These outlets, which sell past collections of iconic items like trench coats, check-pattern scarves, and bags at significant discounts, help manage excess inventory but may undermine efforts to position Burberry as a premium luxury brand. HSBC analyst Aurelie Husson-Dumoutier noted that outlet stores might compromise Burberry’s image, as consumers may opt for discounted versions of items similar to current collections.

Reducing reliance on outlets could be costly since they generate nearly 30% of sales and contribute 50% to profitability, but it could help Burberry align with a higher-end market position and potentially boost its valuation. Bank of America analyst Ashley Wallace pointed out that Burberry’s current market position straddles the line between premium and true luxury, complicating its strategic direction.

Burberry’s New CEO Takes the Reins  Over the past decade, Burberry has undergone frequent leadership changes, including three creative directors in seven years—Christopher Bailey, Riccardo Tisci, and currently Daniel Lee—resulting in varied aesthetics and branding that have created confusion. Lee, known for his success at Bottega Veneta with items like the £3,140 ($4,071) “Jodie” woven leather bag that appealed to Gen-Z shoppers, has yet to replicate that level of impact at Burberry. Despite rumors, Chairman Gerry Murphy stated in July that no changes in creative leadership should be assumed.

Consumer analyst Sasha Kachanova of abrdn emphasized that Burberry is better known for its apparel than leather goods, making it more challenging to create a breakout accessory. Tom Delic, portfolio manager at Momentum and a Burberry shareholder, advocated for a return to Burberry’s core product lines and expressed concerns over the brand’s steep price hikes, which could alienate younger, aspirational consumers.

Twenty-six-year-old shopper Kishica Arora, who was browsing the Hackney, east London, outlet for deals like a discounted “Snip” quilted crossbody bag priced at £1,795 ($2,327.40)—half of its original £3,590 price—echoed this sentiment. While she found good deals on basic items with Burberry’s classic plaid, she admitted she wouldn’t pay full price and preferred more trend-forward brands like Jacquemus.

Burberry’s New CEO Takes the Reins  Burberry’s newly appointed CEO, Joshua Schulman, faces immediate strategic challenges. Schulman, previously the head of Coach, succeeds Jonathan Akeroyd and becomes the fourth CEO of the £2.6 billion ($3.36 billion) British fashion house within a decade. On Monday, Chairman Gerry Murphy reaffirmed the company’s commitment to elevating its status in the luxury market to rival top European brands like Louis Vuitton, Chanel, and Dior.

This announcement left some stakeholders dissatisfied, as they had hoped for clearer signals that Burberry could overcome years of weak performance. There is also speculation that Schulman might shift focus towards more affordable products. By 8:30 a.m. GMT on Friday, Burberry’s shares were trading at 722 pence, marking a 19% decline since the leadership change was announced.

During a press call on Monday, Murphy framed the sudden leadership change as a minor course correction rather than a major shift in strategy, describing it as “a nudge of the tiller and adjustment rather than a fundamental change of strategy.”