Why luxury brand Burberry is no longer on UK’s ‘most valuable companies’ list

Burberry has suffered yet another blow.

The luxury brand founded by Thomas Burberry in 1856 is no longer on the list of the UK’s most valuable companies after sales and profits nosedived.

Burberry, known for its purses and trench coats, has also exited Britain’s main stock index the FTSE 100.

But what happened exactly? Why has the company suffered such setbacks?

Let’s take a closer look:

What happened?

As per CNN, Burberry’s value stands at $2.93 billion today.

That’s less than half of what it was worth at the end of 2023.

The firm has seen sales slip around 20 per cent in the April to June quarter.

More from Explainers

How ChatGPT is becoming everyone’s BFF and why that’s dangerous This Week in Explainers: How recovering from Gen-Z protests is a Himalayan task for Nepal

Its profits have slipped 34 per cent in the year ending March 30, 2024.

The company had listed on the stock market in 2005 and joined the FTSE 100 in 2019, as per The Guardian.

Recent years have not been kind to the iconic British brand.

Burberry in July fired its CEO Jonathan Akeroyd and warned that the financial year ending 2025 was likely to see lower-than-expected profits.

It also said it would not issue any dividend for the year.

“We are taking decisive action to rebalance our offer to be more familiar to Burberry’s core customers whilst delivering relevant newness,” Burberry chairman Gerry Murphy said in July as per CNN. “We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half.”

Impact Shorts

More Shorts

Ghaziabad woman dead, pilgrims attacked in bus… How Nepal’s Gen-Z protests turned into a living hell for Indian tourists

Were bodyguards involved in Charlie Kirk’s shooting? The many conspiracies surrounding the killing

The company will now be listed on the UK’s second-tier FTSE 250.

Why is this happening?

The company has been struggling as spending on luxury goods has slowed down across the world – particularly so in China.

Experts say aspirational shoppers, during a downturn, would rather spend money on established brands like Louis Vuitton and Chanel.

“Burberry was trying to expand into categories and price points where it did not have sufficient brand desirability or heritage,” Adam Cochrane, an analyst at Deutsche Bank Research, told Business Insider. “The combination of higher price points and more sales via outlet channels was always hard to reconcile, and the company never managed to navigate this well.”

“If the general sentiment is weak, the brands that have the weaker momentum, they get discarded first," Sokolova added_._ “They get the most hurt in a downturn.”

But that’s not all.

Experts also said Burberry tried to get away from its strengths and the classic look including with a new signature colour and a new logo – with limited success.

As per The Guardian, 2017 saw Burberry designer Christopher Bailey depart from the company.

Since then, the company has attempted to branch out from raincoats and scarves and into leather goods.

The leather goods market is far more high profit, but also harder to break into given the established players.

Burberry appointed Riccardo Tisci designer in 2018.

Though his designs were critically praised, they were too much of a departure for many loyal customers.

Luca Solca, luxury goods analyst at Bernstein, said Burberry tried to move up too fast.

Solca said its current situation is not maintainable.

“You cannot increase prices with one hand and sell as much as £1bn in factory outlets with the other,” he told the newspaper.

“They tried to be a major fashion player because fashion was back in fashion,” Sokolova added. “It was the same with boosting leather goods. Neither of these things, I would say, are extremely strongly in the brand DNA.”

But those in charge remain optimistic.

Burberry’s chief creative director Daniel Lee was quoted as saying, “What makes Burberry appealing to a potential buyer is the enduring appeal of its products. There is instant brand association with its chequered patterns.”

With inputs from agencies