Following Monday's impactful news, Burberry's stock has experienced a decline. The fashion brand's shares are currently 11% lower in the morning market. This downturn is part of an ongoing trend that began earlier this year, with shares dropping by almost half as of now.
The company announces changes at its helm after facing challenges in sales and a resulting decision to forego dividends. Burberry has selected Joshua Schulman, the former CEO of Michael Kors, to take over from Jonathan Akeroyd who will leave his position immediately according to an agreement with the board.
Chairman Gerry Murphy commented on the situation: "The current performance is not up to our expectations." The company has responded quickly due to unexpected difficulties in a luxury market that's proving tougher than anticipated, leading them to halt dividend payouts for the year.
Burberry disclosed figures indicating significant decreases: comparable store sales fell by 21% in the three-month period ending June 29th, reaching £458 million. Sales across Asia Pacific have also declined by 23%, with revenues projected to potentially decrease by 30% for the full fiscal year.
The company's struggles are set against a backdrop of economic slowdown in China, where GDP growth decelerated to 4.7% in Q2, underperforming expectations and reflecting broader challenges within the luxury market. This comes as Chinese leaders convene at their "third plenum" conference aimed at establishing long-term economic strategies for the upcoming year.
In addition to these trends, other indicators point towards continued difficulties in China's economy: consumer spending has slowed down significantly and home prices have dropped further, suggesting a complex economic landscape ahead.
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