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Josh Schulman is approaching the first anniversary of what has been an eventful period as chief executive of luxury fashion business Burberry.
The former head of US fashion businesses Coach and Michael Kors got to work straight away, setting out a new strategy aimed at returning the business to its roots as a specialist in British outerwear, following a costly and unprofitable incursion into the leather goods market — Burberry declared a £66mn loss in the year to March, as sales slid by 17 per cent.
End markets remain unhelpful. UBS analysts expect demand for luxury goods to remain weak until at least the second half of next year, with demand from both US and Chinese consumers remaining subdued.
Schulman’s turnaround plan involves substantial cost cuts — in May, he increased Burberry’s annual cost saving target to £100mn, from £40mn previously, putting 1,700 jobs at risk. RBC Capital Markets analyst Piral Dadhania has pinpointed its 422-strong store network, which is “outsized” relative to its revenue base, as an area that could be pared back.
Schulman clearly has confidence in his plan, and the Burberry board has confidence in him — it awarded him a bonus of £1.2mn (equivalent to his annual salary) for last year, with the requirement that he spends at least half of it on shares.
Perhaps too much shouldn’t be read into his recent £320,000 purchase, then. With the share price doubling over the past three months, Burberry’s shares trade at an 11 per cent premium to brokers’ consensus forecasts and at a forward price/earnings ratio of over 60. Although there’s an argument to be made for the potential for big earnings upgrades, this puts it well ahead of fellow posh coat makers Moncler and Canada Goose, whose shares trade at 21x and 15x, respectively.
