Burberry plans to cut a up to 1,700 jobs worldwide as part of efforts to slash staff costs and return the luxury fashion brand to a profit.
The retailer said it was upping its cost-cutting target to £100million of savings per year by the 2027 financial year after posting a £3million reported operating loss for the year to the end of March.
It comes as luxury brands around the world continue to struggle against subdued demand, rising costs and economic uncertainty.
Burberry said savings will partly come from a reduction in people-related costs, the firm said, which could affect around 1,700 jobs globally over the two-year programme.
The latest cost-cutting drive would reduce Burberry workforce by nearly one-fifth.
The company said the organisational changes were aimed at ensuring Burberry was fit for the future.
Burberry shares jumped 6.75 per cent or 55.80p to 882.60p following the update. In the last year, the retailers shares have fallen by around a quarter.
Investors have seen several failed turnaround plans from Burberry in recent years. This one feels like a last chance saloon, Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said.
Job cuts: Burberry has announced plans to cut a potential 1,700 jobs worldwide
Burberry has been battling profit warnings, dwindling footfall and lower sales. It is pinning its hopes on a back to basics approach and plans to focus on its popular trench coat and scarves ranges.
Schulman took over last year and shifted Burberrys strategy and marketing to re-focus more on its traditional trench coats and scarves after the brand was bruised by product missteps, excessive price hikes, and a broader luxury downturn.
On Wednesday, Schulman unveiled plans for a further £60million of cost cutting on top of £40million already announced, making £100million savings in total over the next two years. The savings will cost approximately £80million to implement.
Burberry reported a 17 per cent drop in revenue to £2.5billion for the year to 19 March.
It made an operating loss of £3million against a £418million profit the previous year.
However, this was much better than the £7million loss forecast by analysts.
The group made a pre-tax loss of £66 million for the 12 months to 29 March, compared with a £383million profit in the previous year.
Fourth-quarter comparable sales were down 6 per cent, better than analysts average forecast for a 7 per cent decline.
The group said it had endured a challenging first half and warned of a difficult macroeconomic backdrop.
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But, Schulman said in a statement: With improvement in brand sentiment, we will be ramping up the frequency and reach of our campaigns as our Autumn and Winter collections arrive in store.
Sales in the Americas and the Europe, Middle East, India and Africa region both fell by 4 per cent compared with last year, while sales in Asia Pacific were down 9 per cent.
Richard Hunter, head of markets at Interactive Investor, said: Burberry will want to consign the past year to the history books as soon as possible, when the change of chief executive, suspension of the dividend and first-half loss sent the shares into a tailspin.
The group responded immediately and decisively, but the new strategy will take time to filter through.
He added: Overall, the group is far from being out of the woods, but the immediate impact of “Burberry Forward” is a highly encouraging sign.
That being said, the impact of the tariffs, even at the revised lower levels, will need to be closely monitored and there will need to be further proof that the current momentum can be maintained.
The share price has much ground to recover, having fallen by 29 per cent over the last year as compared to a gain of 0.7 per cent for the wider FTSE 250, and by 67 per cent over the last two.
While the market consensus of the shares as a hold could indicate some investor reticence to jump on board the turnaround story just yet, the initial share price reaction to these numbers reflects a rare round of applause on the clear progress which has already been made.
