Burberry in disaster as shares plummet to 15-year low

Burberry shares crashed to their lowest in 15 years amid fears it will struggle to remain a‘high-end luxury brand’.

Shares plunged as much as 8 per cent yesterday to the lowest level since 2009 after analysts at Barclays warned its status as a major player in the industry was under threat.

In a dismal day for the British fashion label, the stock closed down 4.9 per cent, or 29.4p, to 575p, giving it a value of just £2billion.

Advising clients to sell shares, Barclays said the downgrade came despite it ‘already being one of the worst-performing names in our space’.

Burberry shares plunged as much as 8% yesterday to the lowest level since 2009 after analysts at Barclays warned its status as a major player in the industry was under threat

The report added: ‘We have concerns around the ability of Burberry to remain a high-end luxury brand in line with our coverage considering its lack of disciplined full-price strategy.’

And it said the company is on course to make a loss for the first time in the first half of the current financial year.

The latest setback follows Burberry’s relegation from the FTSE 100 index last week. And speculation is mounting that the shares are so cheap that it could become a takeover target.

The latest sell-off – leaving shares down 78 per cent since last year’s peak – is yet another headache for new boss Joshua Schulman. 

He took over in July after Jonathan Akeroyd was ousted, having seen his so-called ‘elevation strategy’ fall flat.

While other luxury goods groups have also struggled, Burberry has fared far worse than many of its rivals because consumers have found its high prices – such as £1,900 for its famous check

trench coat – hard to stomach. Even affluent shoppers have reined back spending on high-end clothes and accessories as a pandemic luxury boom lost its shimmer.

Demand from China, a huge market for luxury goods, has dwindled due to economic woes and flashy displays of wealth falling out of fashion.

And Burberry is unable to compete with the marketing machines of powerhouses such as LVMH, which hired Dune and The Greatest Showman star Zendaya as its celebrity ambassador.

There have been worries that the 186-year-old British name could be snapped up by private equity predators.

Fashion insiders say that an imminent bid is unlikely, given the brand appears to have lost its way by so much.

The job of arresting its decline falls to Schulman, the fourth chief executive in ten years. He was handed a ‘golden hello’ worth up to £9.2million on his arrival.

The business must confront an identity crisis, according to Mamta Valechha, equity analyst at wealth manager Quilter Cheviot.

She said: ‘The management’s commitment to maintaining a luxury positioning while striving for inclusivity raises concerns about potential brand dilution.

‘Striking the right balance between exclusivity and inclusivity is essential to avoid undermining the brand’s prestigious image.’

Steep prices have put off the aspirational shopper while heavy discounting has damaged the ‘must-have’ status of products.

‘This muddled approach – combined with a slowdown in demand from China, the removal of

VAT refunds for tourists in the UK and the rise in the cost of living globally together – have led to falling sales and a potential loss in their forthcoming November results,’ said Jonathan De Mello, founder of JDM Retail.

Creative director Daniel Lee, 38, will look to set a new tone with his catwalk show at London Fashion Week next Monday.

But Burberry is not the only luxury company to suffer. Gucci owner Kering was also downgraded by Barclays analysts yesterday as they said the flagship brand ‘continues to suffer heavy sales decline in China, more so than peers’.