Bad News Burberry?

Burberry Front Row: Spring/Summer 2010 - London Fashion Week

“Apple founder, Steve Jobs did it. But most people would agree there are very few men like Steve Jobs. With the support of a first-class team, he was able to wow consumers and financial markets with his compelling and, at times, visionary presentations.”

Johannesburg, South Africa —Only a month or so ago, Angela Ahrendts was speaking of the “connected culture” she has engendered at Burberry to help support and foster the transformation of the once overexposed and undervalued British brand into a global luxury behemoth, which, among other things, has pioneered the use of digital technology to engage with fashion consumers.

Having steered the company through its repositioning from a staid British trench coat brand to a respected global luxury brand known for digital innovation, it seems that Ms Ahrendts, like Yves Saint Laurent chief executive Paul Deneve before her, will be taking up a senior role at Apple. Ms Ahrendts will be reporting to Tim Cook – the company’s chief executive. Ahrendts it seems will take up the position of senior vice president of retail and online stores — a step down from her role at Burberry, at least in terms of rank. What this suggests is that major technology companies like Apple represent enticements that talented fashion executives find difficult to resist, even if it means they don’t get prime positions. Joining Apple offers Ms Ahrendts the opportunity to participate in the technology revolution in which Apple has played such a pivotal role, while applying the retail and luxury expertise she has honed at Burberry. Apple is credited for constantly re-thinking the anatomy of a retail store in the digital age, and they’ve done so with the acquisition of Ahrendts. Who knows, it could also be an opportunity for her to take on an even bigger role in the future.

For Ahrendts, the move seemed to be a no-brainer, but perhaps the even more surprising news is that Christopher Bailey is set to take on the both the role of chief creative and chief executive officer at Burberry. It is unprecedented for a designer to graduate from creative director to chief creative officer to chief executive officer, as Bailey will have done when the transition is complete. That the Burberry board approved his appointment to both positions reveals the sheer confidence the company has in his abilities and commitment to the enterprise, but it does beg the question: can any single human being, even if they are superhuman, handle both the role of chief creative and chief executive officer?

Brands like Giorgio Armani and Tom Ford are effectively run by Mr Armani and Mr Ford, who look after both the creative and commercial sides of their businesses, but these are private companies that do not have to answer to the public markets. Can Mr Bailey, someone who is obviously not au courant with the dollars and cents of balance sheets, intricacies of global supply chains and the excruciating detail of retail operations, run a multi-billion dollar creative business in every sense of the word and also communicate with analysts on Wall Street and in London? Will Mr Bailey be able to effectively answer questions about both the creative direction of the company as well as its financial performance? Apple founder, Steve Jobs did it, but most people would agree there are few men like Steve Jobs. With the support of a first-class team, he was able to wow consumers and financial markets with his compelling and often visionary presentations. Simply put, could Mr Bailey be the Steve Jobs of fashion?

The stock markets don’t seem to think so. Burberry’s share price had plummeted by more than seven percent by the close of trading in London today, even after the company reported 17 percent growth in revenues in the six months to the end of September, ahead of consensus analyst expectations. The unanticipated nature of Ms Ahrendts’ announcement and the choice to appoint Mr Bailey as her successor all suggest to me that this has come as a big surprise to the Burberry board (which from an outsider’s perspective seems to have decided very quickly on what to do after Ms Ahrendts’ announced her plans to leave). Some couldn’t help but notice that Mr Bailey looked a little outside of his comfort zone in the video released by Burberry today as the comments section buzzed with opinions.

While he has played an integral role in the transformation of Burberry, there remain big question— notwithstanding his obvious creative talent — about his ability to shepherd this business forward without the partner who has stood by him to write one of the greatest ‘turnabout tales’ in fashion history and fluently communicate that vision to the world. This is especially important when you are running a company that is carving new paths and operating in a market that is in constant flux.

If I were a Burberry shareholder today, I’d be reading all the articles concerning the matter with tons of tabs open. I imagine that those with dollars, pounds, euros, rands or yens invested in Burberry have had their mouses very close to the sell button.

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