Burberry proposes 500 job cuts as coronavirus crisis has ‘severe impact’ on sales

Luxury fashion brand says it expects it ‘will take time’ for sales to ‘return to pre-crisis levels’

Burberry has announced plans to cut its global workforce following a decrease in “luxury demand” during the coronavirus crisis.

The British fashion label, which is best known for its trench coats and signature check, said it plans to cut 500 jobs worldwide in a bid to reduce costs by £55m on an annualised basis.

Burberry said the cuts will represent about five percent of the group’s global workforce.

The company added that while it plans to keep its headquarters in the UK, it will “further streamline” head office roles, reduce office space and “improve retail efficiency”.

The savings are expected to be reinvested in marketing activities such as pop-up stores, digital campaigns, events and improved store displays.

Marco Gobbetti, chief executive of Burberry, said the move comes after retail sales plunged by 48 per cent in the three months to the end of June, including a 75 per cent fall in Europe and the Middle East, as countries were forced to close shops to help curb the spread of Covid-19.

“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,” Gobbetti said.

”As we enter the second phase of our strategy, we are sharpening our focus on product and making other organisational changes to increase our agility and generate structural savings that we will be able to reinvest into consumer-facing activities to further strengthen our luxury positioning.“

The group also warned that it expects its second quarter to the end of September to be "materially impacted" by the pandemic, with sales forecast to drop by up to 20 per cent.

Burberry added that trading in the second half will ”largely depend on the actions governments pursue to control the spread of the virus as economies restart“, including the potential for a second peak of the pandemic and additional lockdowns.

The luxury brand is not the only fashion business to announce job cuts following poor sales amid the coronavirus outbreak.

Last month, Mulberry announced that it would be reducing its workforce by 25 per cent across head office, retail, manufacturing and distribution.

The leather goods retailer said that while its digital sales have been “good” during lockdown, it could not “fully offset the decrease in demand experienced from store closures”.

A number of high street fashion brands have also been impacted in recent months.

While many have managed to stay afloat by using government support, several businesses have been forced to call in administrators, including Debenhams, Victoria’s Secret and Zara.