Burberry RTW Spring 2018

When Christopher Bailey said he’d leave his post as chief creative officer of Burberry next spring, after a 17-year stint during which he turned the sleepy brand into a luxury powerhouse, the company’s investors missed a beat.

In the EKG of corporate sentiment that is the stock market, though, it was only a small blip for such an important shift at the brand.

Burberry’s shares fell just over 3 percent on word of Bailey’s departure, bounced back in 30 minutes and closed the day down 1 percent, at 1,902 pence.

That speaks to many things, including faith in chief executive officer Marco Gobbetti, some expectation that such a move could be in the offing, and hopes of a buzzy new talent to reinvigorate the brand.

It also underscores the investment set’s difficulty in quantifying creativity and vision and their importance to design, brand and the company at large.

Everyone knows there’s a connection between Bailey’s artistic sense and Burberry’s bottom line, but it’s not easy to put a number to it and plug it into an investment thesis or an algorithm.

“There’s a tendency on the part of the investment community to value efficiency over creativity,” said Les Berglass, ceo of executive search firm Berglass + Associates. “The consumer values creativity over efficiency and there’s the disconnect — the consumer has a filter for good things.

“The product is the most important thing, but when you have financial people analyzing a business, they analyze it financially, not creatively,” Berglass explained. “You can’t ask a right-handed person to do a left-handed person’s job and vice versa. At the end of the day, it comes down to product.”

While this is something that eludes many, a few analysts covering fashion are attuned to product and the people who make it and are building investment ideas around that understanding.

For instance, Exane BNP Paribas analysts Luca Solca told clients: “Creative directors — like all artists [painters, composers, singers] — tend to produce variations on a theme. And that most brands that have gone through a revival had to first find new creative resources. After 17 years at the helm and a massive contribution to Burberry, we support Christopher’s decision to move on. This opens the opportunity for Burberry to turn the page, and seek new creative talent….The appointment of a worthy successor to Christopher Bailey — capable of writing a new chapter for Burberry — will be key for the investment opportunity.”

Still, that’s a leap many analysts can’t take.

Consultant Jonathan Low, partner at Predictiv, said the investment set’s tendency is to gloss over the creative aspect of business and focus on hard numbers in their evaluations.

“They acknowledge its existence, but don’t really understand it, and because they’re numbers guys, they tend to focus on people who can speak their language,” Low said.

That leaves open an opportunity to better understand — and invest — in fashion companies by taking a more holistic view of what makes them tick.

“One might argue that LVMH [Moët Hennessy Louis Vuitton] has done a great job of assembling a portfolio of brands and analysts might attribute it to the brilliance of the ruling [Arnault] family, but the reality is their brilliance lies in their being able to pick people who not only have a great feel, but also know how to create products that people want to buy,” Low said. “Looking at that notion of who’s got the most impressive portfolio of people in that industry over time could be really interesting.”

load comments
blog comments powered by Disqus