Burberry, a renowned British luxury brand, was removed from the FTSE 100 index in the UK.

• On Wednesday, the British luxury fashion house Burberry Group was removed from the U.K.'s FTSE 100 due to declining sales and management changes.
• The decline in Burberry's share price, which has fallen more than 53% this year, represents a new setback for the company.
• A change in direction is indicated by the appointment of Joshua Schulman as CEO in July, as successive CEOs have tried to improve the company's aesthetic.

The British luxury fashion house exited the U.K.'s stock market index on Wednesday due to declining sales and numerous management changes, which have intensified the challenges the 168-year-old retailer is facing.

The company was promoted to the FTSE 250 during the September quarterly rebalancing, according to FTSE Russell, ending its 15-year tenure in the UK's large-cap FTSE 100 blue chip index.

The changes will be implemented at the close of trade on Sept. 20 and will take effect from Sept. 23.

The recent decline in Burberry's share price, resulting from the brand's loss of consumer favor, has been exacerbated by its relegation.

Over the past year, the stock has fallen more than 70%.

Burberry's current market cap of £2.34 billion ($3.06 billion) is lower than the other FTSE 100 constituents and some of the top performers in the FTSE 250, causing funds that invest in the FTSE 100 to sell their Burberry holdings.

Reviving brand Burberry

Burberry's struggles long predate the recent share price declines.

In 1856, Burberry was established in Basingstoke, England, and later listed on the London Stock Exchange in 2002. The company gained international recognition with its iconic trench coats, handbags, and distinctive check print.

The addition of the luxury label to the FTSE 100 in September 2009 was viewed as a testament to its enduring appeal and resilience, despite the Global Financial Crisis.

The widespread acceptance of Burberry's signature pattern among the British working class in the 1990s and 2000s posed a significant threat to the brand's upscale image, which it has been trying to regain ever since.

Despite the efforts of multiple CEOs to revive the company's image and position it as a premium brand, the market remains unconvinced. The high turnover of CEOs over the past decade, with four leaders holding the post, has also left investors feeling uncertain.

The appointment of Joshua Schulman as CEO in July implies a shift in strategy.

According to Luca Solca, managing director and sector head of global luxury goods at Bernstein, the former Coach and Michael Kors CEO could revive the company's fortunes by shifting the focus from brand elevation to a "British Coach" strategy. This would involve reducing costs, doubling down on outlets, and increasing exposure to off-price retailers.

The appointment of Josh Schulman, a former CEO of MK and Coach, aligns with our advocated "British Coach" strategy, as stated in an email to CNBC.

Berstein estimates suggest that a new strategy could significantly improve the company's financials, which have been struggling. In July, Burberry reported a 21% decline in first-quarter comparable store sales, leading to its third profit warning in 12 months and the suspension of its dividend payments.

RBC analysts Piral Dadhania and Richard Chamberlain wrote in a July note that the Burberry brand is experiencing soft brand momentum and that a significant reset is necessary to prevent further market share losses.

If Solca is correct, a takeover of the company could be possible if the leadership changes and the share price recovers. However, if the share price does not improve, the probability of a takeover decreases.

Luxury sector woes

Gerry Murphy, the chairman of the fashion brand, is reportedly being replaced by the brand, which is currently working with headhunters to find a new chairman.

CNBC's request for comment on the report regarding Burberry was not immediately responded to by the company.

Smead Capital Management CEO Cole Smead proposed that Schulman take on the chairmanship role to expedite his strategy and rebuild investor confidence. While this practice is rare in U.K. companies, it is more common in U.S. firms.

"It is a waste of time for the board to search for the right chairman when there are pressing issues to address with Mr. Schulman's efforts for shareholders," Smead, an investor in Burberry, stated in an email. In a separate note, he recommended that the entire board be replaced to reassure investors.

The luxury sector, including Burberry, has experienced a decline in consumer spending due to inflationary pressures and economic uncertainty, with Chinese luxury consumption being particularly affected.

In July, Gucci cut its full-year guidance after reporting a fall in sales, notably in the U.K. and China, while Gucci owner issued a weak forecast, as a "marked deceleration in China" weighed on first-half revenues. Additionally, revenues also fell in the second quarter on weaker sales in Asia, excluding Japan.

Despite the challenges, some players in the luxury market, including Cartier owner Richemont and Hermes, have reported strong sales.

Burberry can recover despite the cyclical nature of the luxury sector, which was highlighted by the slowdown, according to Smead.

"The adage is that if you fall behind, do so quickly. Burberry did so early on, and we predict they will address their issues before other luxury brands," he stated.

Smead stated that he anticipates the company will eventually be readmitted to the FTSE 100, but that new leadership is unlikely to restore its substantial dividend due to "poor judgment" regarding previous payments.

Burberry's half-year financial results are due out on Nov. 14.