Burberry makes plans to let go of 1,700 employees due to declining revenue.

Burberry, the iconic British fashion house, has navigated a challenging year, with a strategic turnaround plan helping to elicit a positive market reaction. The company's financial results for the year ended March 29, 2023, reveal a revenue of 2.5 billion pounds or approximately $3.3 billion.

The second half of the year saw a decline in comparable store sales of 5%, a significant improvement from the 20% decline in the first half. Retail revenue dipped 13%, while wholesale revenue dropped 37%. However, the adjusted operating profit for the year plunged 94% to 26 million pounds.

CEO Joshua Schulman acknowledged the challenges faced in the first half of the year, stating that Burberry has moved "at pace" to improve its performance. Part of this strategy involves a renewed focus on heritage staples, such as the iconic trench and checked coats, which helps the brand move away from short-lived fashion trends and reinforce its identity.

However, Burberry's signature trench coat, while an undisputed icon, poses a business challenge due to its lifetime nature, limiting repeat purchases. The company also struggles to compete in categories like leather goods and footwear with established luxury players such as Louis Vuitton and Hermès.

One of the most significant changes in the past year was the departure of Creative Director Daniel Lee. While the alignment of his creative vision with Burberry's heritage DNA is yet to be fully realized, Tang, an industry watcher, notes that his sharp luxury aesthetic could help Burberry in the long run. However, there is ongoing speculation about the potential impact of his departure on Burberry, with some believing it could cause short-term instability.

Despite this, Burberry's strength in traditional products may help absorb any shocks caused by potential leadership changes or short-term instability. The company accelerated its pace to restore scarcity and address inventory overhang, resulting in a gross inventory decline of 9% by the end of March.

In a bid to improve profitability, Burberry announced up to 1,700 job cuts as part of an organizational change. The company's strategic efforts seem to be paying off, as its revenue for the year beat analyst consensus, causing shares to rise by more than 17%.

As Burberry moves forward, the alignment of its creative direction with its heritage DNA will be a key factor in industry watchers' assessments of its future performance. The industry eagerly awaits the creative vision that Burberry's new Creative Director will bring and how it will influence the company's sales.