Dive Brief:
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Burberry Group PLC CEO Christopher Bailey will receive a 75% cut in compensation for this year, earning £1.89 million ($2.74 million) in fiscal 2016 from £7.51 million a year ago, the Wall Street Journal reports.
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His salary remains the same at £1.1 million, but he and other executives won’t be seeing the same level of performance-based bonus pay because the company hasn’t seen its profit targets.
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Last year Burberry’s revenue fell 1% and pretax profit fell 10%, in large part because its fortunes have been closely tied to sales in China, according to the Wall Street Journal.
Dive Insight:
The luxury market is facing the same head winds working against many retailers, including changing spending priorities and a strong dollar curbing spending from tourists. Burberry under Bailey has taken steps to address many of its issues, including streamlining the time it takes to sell new designs after unveiling them on the runway. It also announced a cost-cutting plan in May, where it will shave off at least $144.7 million in expenses a year by fiscal 2019.
Although Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext, told Retail Dive earlier this year that Burberry is a favorite among millennials who can afford luxury goods, younger consumers are especially prone to spending on experiences over stuff, according to a PwC survey published last year. Millennials surveyed said that more than half (52%) of their holiday spending would be experience-related, compared to 39% for older consumers.
Luxury retail is also hit harder by the dollar’s current strength, which is making goods more expensive for tourists here and international customers abroad, and many well-heeled consumers are reining in spending as global markets show continued volatility and weakness, hitting their portfolios hard and clouding their prospects.
As a result of all that, luxury sales are slowing, growing just 1% to 2% last year, compared to 3% in 2014 and 7% in 2013, according to Bain and Co. And luxury sales in China, a particular vulnerability for Burberry because it staked much of previous expansion there, slowed 2%, according to another Bain study.
According to the Journal, some investors are questioning whether Bailey, also the retailer's chief creative officer, is a bit over his head with both roles.
