LONDON — Salary packages are getting slimmer at Burberry and Richemont, where top executives saw their year-end pay pinched by fickle demand for luxury goods and falling sales and profits in fiscal 2015-16.
The current year is also looking pretty grim for both companies and employees.
In the year to March 31, Burberry saw profits before tax fall 6.5 percent to 416 million pounds, or $628.2 million, on revenue that was down 1 percent on an underlying basis to 2.5 billion pounds, or $3.78 billion.
Against the backdrop of harder times, the company has unveiled a new strategy with the aim of delivering at least 100 million pounds, or $144 million, of cost savings by 2019, with some 20 million pounds, or $29 million, expected this year.
All figures have been calculated at average exchange rates for the periods to which they refer.
Last month, Burberry said it had already saved more than 25 million pounds, or $37.8 million, in discretionary costs in 2015-16, according to plan.
All management, and most importantly Christopher Bailey, the man doing double duty as chief creative and chief executive officer, have been forced to make sacrifices in order to reach those goals.
In the year to March 31, Bailey received a pay package of 1.9 million pounds, or $2.9 million, compared with 7.5 million pounds, or $12.1 million, in the previous year.
While he still received his base salary of 1.1 million pounds, or $1.7 million, he collected no bonus and no share plan awards.
He did, however, get 464,000 pounds, or $700,640, in benefits and allowances, and 330,000 pounds, or $498,300, paid into his pension.
Other top executive directors also lost out on bonuses and share plan awards.
In its annual report, Burberry was clear about the reasons for the cuts. It cited “a challenging external environment,” along with “stretching” performance targets set out at the beginning of its financial year.
The group also noted that group adjusted profit before tax was below the threshold target set by the remuneration committee at the start of the year — which translated into a big goodbye to annual bonus payments.
Burberry said that “relatively subdued growth” in group adjusted profit before tax between 2013 and 2016 meant that share awards granted in 2013 based on that particular performance measure would not vest.
A short plane ride southeast, in Geneva, Switzerland, Richemont’s top brass were suffering similar cuts to their pay packages.
Profit for the year at Compagnie Financière Richemont, parent of brands including Cartier, Van Cleef & Arpels, and IWC, rose 67 percent to 2.23 billion euros, or $2.45 billion, bolstered by the sale of Net-a-porter and other items. Operating profit was down an underlying 11 percent.
Sales increased 6.4 percent to 11.08 billion euros, or $12.19 billion on a reported basis. On a constant currency basis, however, they were down 1 percent.
In the year ended March 31, Richemont’s chief executive officer Richard Lepeu saw his salary drop to 9.7 million Swiss francs, or $10 million, from 14.3 million Swiss francs, or $15.4 million, in the previous year.
Bernard Fornas, who held the position of co-ceo until the end of the year, saw his salary drop to 9.7 million Swiss francs, or $10 million, from 11.7 million Swiss francs, or $12.6 million, compared with the previous year.
Gary Saage, Richemont’s chief financial officer, meanwhile took home 8.5 million Swiss francs, or $8.8 million, in fiscal 2015-16, compared with 9.9 million Swiss francs, or $10.7 million, in the previous year.
Richemont said in its annual report that the group’s compensation strategy “should reward our most senior executives when the group outperforms our competitors while making the necessary adjustments in periods of more moderate performance.”
For the year-under review, Richemont noted that the fixed compensation (base salary and benefits) of the senior executive committee was 8 percent lower than in the previous year, with variable compensation (short and long-term incentive plans) 30 percent lower.
Richemont added that fixed compensation is being “further reduced” in the current financial year so that Richemont remains in line with competitors on the Swiss stock exchange, making the current year’s salary freeze at Burberry look downright generous.