Coronavirus: Burberry to axe 500 jobs worldwide as sales slump

Burberry (BRBY.L) is set to slash around 500 jobs worldwide, as its sales almost halved in the wake of store closures and weaker consumer demand because of the coronavirus.

Chief executive officer Marco Gobetti announced plans for “structural savings” in its first-quarter trading update on Wednesday. The job losses are understood to be likely to result in around 150 UK job losses, affecting office-based staff.

The fashion retailer saw its comparable sales fall 45% to £257m ($324m) in its first quarter ending 27 June. The decline was steepest in the Europe, Middle East, India & Africa (EMEIA) regions, down 75%, and it blamed declining tourist numbers. This was followed by the Americas, where sales slid 70%, but it said trends had “improved significantly” in June.

In the Asia Pacific region it declined only 10%, but saw double-digit growth in mainland China. In June, China sales exceeded the pre-pandemic level of 30%, according to the company, with a “repatriation” of sales as customers bought at home rather than abroad.

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Burberry said sales had begun to recover as stores gradually reopened worldwide, down only 20% worldwide in June overall.

"In Q1, sales were severely impacted by the drop in luxury demand from COVID-19 and we expect it will take time to return to pre-crisis levels with the resumption of overseas travel,” said Gobbetti.

But he said the company had seen an “excellent response” to new product launches in recovering economies and online, including demand for luxury goods in mainland China and Korea.

The company said in April it would continue to pay employees unable to work because of store and site closures, declining to use government jobs support like the UK furlough scheme. More than a third of its staff are in the UK, according to Reuters.

Shares in Burberry slid 5% on Wednesday morning. But Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the results were a “mixed picture.”

“Overall sales numbers are predictably ugly, but the pace of recovery is faster than we’d expected with a particularly stylish turnaround in mainland China. A 20% decline in June sales is painful but still a pretty good result all things considered.”

But he said short-term sales were not “expected to improve much from here,” adding: “With some stores likely to remain closed, travel restrictions still in place and a second wave of infections always a danger, the pain could be protracted.”