Burberry holding talks over job cuts

The news came as Burberry reported a 3 per cent drop in like-for-like sales in what it described as a challenging first quarter.

The group hopes to make cost savings of £100m by overhauling its operations as it struggles to cope with a reduction in the number of Chinese tourists visiting its stores in Europe and weak demand in Hong Kong.

Burberry’s finance director Carol Fairweather said: “We have moved into consultation with our employees, but I can’t say anymore. That work is ongoing. It’s not appropriate for me to give details.”

It is unlikely that the skilled workers who stitch 5,000 heritage trench coats a week at Burberry’s factory in Castleford will be affected as their jobs are vital to Burberry’s success. Their stitching skills take a year to hone and Burberry is hoping to persuade its 800 workers in Castleford and Keighley, where the gabardine fabric is woven, to move to a new state-of-the-art manufacturing and weaving facility in Leeds.

Burberry is spending over £50m on the new facility, situated on the South Bank of Leeds, which will employ more than 1,000 people when it is completed in 2019.

Instead the job cuts are likely to hit the group’s head office or in stores.

The luxury goods group said a positive 3 per cent contribution from new stores resulted in flat retail sales of £423m, slightly better than analysts’ expectations.

Burberry has benefited from a drop in the value of the pound after Britain voted to leave the EU last month. It said its adjusted profit for the year would be boosted by about £90m, compared with a previous forecast of a £50m boost.

The group, known for its camel, red and black check design, incurs about 40 per cent of its costs in Britain, but makes only 10 per cent of its sales in its home market and more than half of those come from foreign tourists in London, analysts estimate.

Ms Fairweather said it was too soon to tell whether the group is benefiting from overseas tourists making shopping trips to the UK following sterling’s dramatic fall.

“In the UK we saw some positive sales in the final weeks of the quarter, but it is too early to call what the repercussions of Brexit will be,” she said.

Burberry’s shares rose to 12 week highs after the group announced on Monday that Halifax-born creative director Christopher Bailey will step down as CEO next year to focus on being creative director.

Marco Gobbetti, the Italian boss of LVMH brand Celine, will replace Mr Bailey some time next year. Mr Bailey will be moved to the role of president and retain his title of chief creative officer. Ms Fairweather will also step down by the end of January.

Mr Bailey has seen his pay plummet 75 per cent from £7.5m to £1.9m after he lost out on a bonus due to Burberry missing its profit targets.

The firm said Mr Gobbetti has a “proven track record” for developing brands such as Givenchy and Moschino.