5 challenges for Burberry’s new chief executive

Luxury retailer Burberry has had to cut its cloth after announcing a 3% fall in sales last quarter, following previous disappointing sales figures.

It is also facing a period of internal change, with Marco Gobbetti this week being brought in as chief executive to stem the sales decline.

Here are five issues Mr Gobbetti must find a response to – and fast.

1. Poor sales in the Far East

Even Chinese fashionistas have had to rein in their spending this year and considering a third of Burberry sales come from Asia, it’s hardly surprising that the double-digit decline in comparable sales – particularly in Hong Kong – has had such a drastic effect on Burberry’s global performance. 

 

2. Tourists to Europe have not been choosing Burberry

Sales to “travelling luxury customers” in continental Europe have been hit, causing another of Burberry’s key markets to face a double-digit drop in sales.

With economic sanctions in Russia also affecting demand, it’s easy to see why this luxury retail brand has suffered during this quarter. 

 

3. Luxury sector struggling

During a time of uncertainty, people are spending less in general, and especially on luxury brands. Burberry has told the stock market it expected the “challenging environment for the luxury sector” would continue.

 

4. Too many products

As Burberry saw sales slip in May, they looked to reduce their product range and focus more on the popular products like handbags and trench coats. The idea that there were simply too many products to choose from could be another reason for the declining sales. 

5. Lack of direction 

Shareholders had voiced their frustration with Christopher Bailey’s performance as chief executive, and were frustrated at his dual role that also saw him be the group’s chief creative officer.

The appointment of Mr Gobbetti to take over the day-to-day management and provide strategic direction produced an instant increase in its share price, rising more than 10% in 48 hours.

The markets are optimistic and Mr Bailey has said there is “real confidence for the future”. Now Burberry just needs to find a way to reverse its falling sales.

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