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Burberry is a British luxury fashion brand. The company was first founded in the mid 1800s by Thomas Burberry in Hampshire, and would grow throughout the early 1900s as its jackets were worn by British explorers and military personnel. Around this time, the brand also developed its distinctive check pattern which appears on the lining of many of its jackets – combining a beige base with layers of red, black and white.
The image of the brand has constituently been one of luxury fashion (minus a period in the early 2000s where the name was associated with the clothing choices of football hooliganism and ‘chav’ culture, a PR conundrum arguably being faced today by North Face). From the mid 2000s onwards, the company expanded overseas in an aggressive campaign which focused heavily on the US and European markets.
Recent financial data suggests that Burberry are facing serious financial problems – mostly due to falling sales.
The luxury fashion sector has been facing a drop in sales as a whole (even if Burberry’s numbers are particularly concerning at the moment). This is partially due to the ongoing cost of living crisis in many of their markets (as a result of which, demand for luxury goods will naturally fall). Gucci announced similar financial concerns (via its parent company Kering) back in March.
Burberry’s retail revenues specifically fell 21% (a very significant number in context) over the last few months with particularly large drops in the US and China . Profits have also fallen 40% across the last full year – completely unsustainable numbers going forwards.
As already mentioned, the ongoing cost of living crisis has hit luxury fashion brands hard across the board. While it may seem that this is something outside of Burberry’s control (and to some extent, that is true), the fashion house has arguably exacerbated the problem caused by that context via its business decisions.
Most significantly, CEO Jonathan Akeroyd had spearheaded a campaign internally to pitch Burberry as a more upmarket brand (targeting the higher echelons of the luxury fashion space), which many commentators now agree was likely a mistake. As a result, Akeroyd has left ‘with immediate effect’, and has been replaced by Joshua Schulman (who was previously head of competitor Michael Kors). He has the backing of Chairman Gerry Murphy to ‘take decisive action to rebalance our offer to be more familiar to Burberry’s core customers’ – in other words, to try to re-engage with consumers who shop primarily at the lower end of the luxury spectrum.
Aside from the change in personnel at the leadership level (as already discussed), there have been a number of changes in the wake of this emerging story.
First, the company suspended its planned dividend to shareholders in an attempt to minimise its outgoings (a common move when a company finds itself in such difficulties).
Perhaps more significantly, jobs appear to be at stake. While it is certainly too early to call in the insolvency lawyers, some attempt at restructuring may well be inevitable. CFO (chief financial officer) Kate Ferry has suggested that hundreds of roles across the brand’s operations might need to be cut in order to rebalance the ship.
Finally, following these fresh announcements, a 17% drop in Burberry’s share price was noted by many analysts. This is to be understood in the context of Burberry’s shares dropping more than 50% over the course of the past year, too.
There are a number of talking points here which aspiring lawyers can take into their upcoming applications. Whether a future solicitor applying for open days, vacation schemes, and training contracts – or a future barrister looking for pupillage, the breadth of discussion here is wide (and could be mined both within written application forms and as part of interview discussions further down the line).
The clearest value to this story is (quite evidently) being able to showcase your commercial awareness. Being able to discuss how large businesses operate (including the challenges they face, identifying the reasons for those challenges, and understanding how they might get themselves out of those situations) and how to advise them in light of that context is absolutely crucial for a large number of lawyers.
This is especially the case if you are applying for roles at commercially-focused law firms as a solicitor dealing primarily with large, corporate clients – for example in Magic Circle or elite US firms. These organisations will be very interested to see you developing your commercial awareness through picking apart stories like this, especially when bearing in mind that today’s corporate lawyers are arguably expected more than ever to understand not only the law, but also the business contexts in which their clients operate.
However, this is not to say that there are not more technical, legal points to discuss here – which can be understood best by considering a range of different practice areas. Many of the issues here are innately tied to corporate law, for a start (for example, the discussion around holding back on dividends). There are also a number of employment law issues present (see the potential cutting of hundreds of jobs, which will likely happen ‘globally’ and so require a cross-jurisdictional approach to employees’ labour rights).
Additionally, if the situation does continue to worsen, Burberry might need to consider the views of insolvency and restructuring lawyers, who can boost the prospects of long-term survival for companies who find themselves in such difficult situations. Many of these different practice areas clearly overlap, and so you could go on to explain in your applications how law firms and chambers regularly benefit from ‘cross-selling’ different services within their one organisation.
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