LONDON — Burberry on Monday finally recognized that its experiment in combining art and commerce in one executive wasn’t panning out — and Christopher Bailey revealed plans to hand over the chief executive officer reins to Marco Gobbetti of Céline.
Bailey will become president and remain chief creative officer. Gobbetti will join Burberry some time next year, but an exact date has yet to be determined.
The move had been long called for by analysts and investors as Burberry, like other luxury goods players, battles the headwinds of a slowing Chinese economy; Brexit, and changing consumer spending patterns. Bailey’s tenure as both ceo and chief creative officer of the British group coincided with a sharp deterioration in its performance and Gobbetti’s appointment Monday was only one of the major changes the company revealed.
In addition, Burberry reached outside the fashion industry to tap a new chief operating officer and chief financial officer, Julie Brown, who currently is cfo at the U.K. medical technology company Smith and Nephew plc. Brown’s arrival means Carol Fairweather, who had been cfo since Angela Ahrendts was ceo at Burberry, will exit the company.
The moves are all part of the company’s plans to simplify its operations, cut costs and shift the retail focus away from tourists to locals and a younger, digitally engaged fan base. The brand is also seeking to clarify its offer — slashing 15 to 20 percent of its product assortment in the coming year, with more cuts to come. Burberry is planning to merchandise and promote seasonal products in a clearer way in store, with a focus on key products that best represent the mood of the runway collections, and cater to local climates and clientele.
The management moves were given a thumbs-up by the financial markets. On Monday, shares in the company closed up 4.2 percent to 12.11 pounds, or $15.68 at current exchange.
But in an indication that these were changes dictated as much by the Burberry board as by Bailey, both he and Gobbetti will report to Sir John Peace, Burberry’s chairman who, along with Ahrendts, had made the decision in October 2013 to name Bailey both ceo and chief creative officer. At the time, Ahrendts and Peace were seen in a rather awkward video explaining how the move was best for the company and that Bailey was the ideal candidate to take on both roles. Bailey was barely featured in the video and, indeed, has rarely given press interviews in the two years since he became ceo in May 2014.
On Monday, Bailey put a positive spin on all the moves.
“It’s what’s best for the brand in the long-term,” he told WWD. “This company is very, very important to me professionally and personally and I’ve taken a very pragmatic approach to what we needed.
“I knew that we needed to evolve our organization, our structure, the ways of working, the processes. I knew that I needed to bring somebody in to partner with me because there’s a lot of change going on — in the macro, our industry and also in the company. I just took the process in a very, very thoughtful way,” he said.
Monday’s announcement came two months after Bailey laid out a major strategic overhaul and promised that management changes would come in due course. It also follows the news last month that none of Burberry’s senior management would be receiving a bonus this year, recognition of the group’s poor performance in 2015.
Bailey said Gobbetti — a rising star at LVMH Moët Hennessy Louis Vuitton — has “an innate sense of getting a creative vision into a global store environment. He knows how to build stores and make them productive and to take a creative vision and take them into a retail experience.”
Gobbetti has been ceo at Céline since 2008, arriving in tandem with creative director Phoebe Philo and engineering a swift rejuvenation and overhaul of the brand.
Bailey said their skills were complementary. “I love technology and digital and he’s a real expert in physical retail. He’s also a very lovely gentleman, and I have such huge respect for what he’s done at Céline and the partnership he built with Phoebe.
“I will focus more specifically on design, the products, creativity, architecture, marketing, communication, experiences. He will focus more on the operational side, finance, retail and merchandising. I see this really as two pieces working together. We will jointly lead all the strategies and people,” Bailey said.
As for Brown, she will effectively succeed John Smith, who last month revealed his resignation as chief operating officer, and Fairweather.
Bailey said Brown would handle the financial aspects of the company, and be investor-facing.
“She’s going to be a wonderful partner for me, and also when Marco gets here, to make sure we’ve got the right infrastructure, the right systems, the right processes throughout the company. When I started this process I didn’t have a person in mind, I didn’t have a title in mind — I just knew what we needed,” said Bailey.
Asked whether his dual role has been onerous, Bailey claimed he never felt too overwhelmed.
“When I did this business review and I realized how we were going to realize these opportunities, I knew that it was more about the skills that we needed to bring in. I mean, I loved the idea that I might be able to relax a little bit now, but I sense that I won’t. I’m still going to be leading the company. Marco and I will share that leadership now.
“It was never for me a question of the job being overwhelming. I’m a workhorse and I get really creatively inspired by our business, by our industry and by the challenges. But there is a lot of change that we need to make happen in order to do all the things that we’ve identified, and I knew that I needed somebody to work alongside,” he said.
As for Gobbetti’s replacement, LVMH has a track record of promoting executives from within. According to one source, among seasoned and accomplished ceos that could be considered are Philippe Fortunato, ceo of Givenchy since 2014; Lisa Montague, ceo of Loewe since 2009, and Patrice Wagner, ceo of Le Bon Marché since 2010.
In a flash note following the announcement on Monday, Luca Solca, managing director at Exane BNP Paribas, called the changes “a step forward for Burberry, where we perceived a need of reinvention and stronger direction.”
Solca said that until now, Burberry “seemed stuck with a less-than-ideal senior management structure,” and both the business and the share price had suffered under Bailey’s dual role.
He added that Gobbetti would have to prove himself in a much larger company than Céline, while Brown will have to make her experience relevant and credible in a very different industry.
Thomas Chauvet of Citi called Gobbetti’s skill set interesting.
“During his tenure at Céline, the brand has enjoyed double-digit sales and a significantly expanded [earnings before interest and taxes] margin partly driven by the success of leather goods.”
He called Brown “a very experienced candidate well-appreciated by the market, having successfully implemented restructuring and cost-savings plans in her previous roles.”
As reported, both Stacey Cartwright, Burberry’s former cfo, and now head of Harvey Nichols; and Gian Giacomo Ferraris, the former Versace ceo, both denied to WWD that they were going to take up the potential role of ceo at Burberry.
Helen Brand, luxury analyst at UBS, said her team sees the new appointments “as a positive, given that there is a good balance of luxury expertise combined with operational focus. In addition, Bailey’s sole focus on creative should help to drive the product, which is key for the brand’s success.
“The market had been focused on Burberry making a senior appointment to drive the retail excellence program. We believe that the new ceo will spearhead this program, and we look forward to hearing how his previous experiences can be applied to Burberry’s aim to improve sales densities,” she said in a report following the announcement.
Bailey also talked about Burberry’s new see-now-buy-now strategy, with the first new-format runway show taking place in two months’ time. As reported, buyers have been signing NDAs all summer as they place orders for the men’s and women’s collections which will hit shop floors as soon as the curtain comes down. Bailey said the company is happy with the progress so far.
“The impressive thing is the enthusiasm around it, from the retail side, but also from the majority of the magazines and the media side that we’ve worked with. This is not a situation where we’ve got the answer to everything. We’re trying something new and we’re excited about it and we’re learning the whole time how we can do this and how we can do it better,” Bailey said.
It’s been a transformational few weeks for Burberry — and not only due to the management changes.
Britain’s vote last month to quit the European Union was the last thing that Bailey wanted. He joined many other FTSE 100 chiefs in signing a series of letters in support of the Remain campaign. As a result of the vote, though, the pound has hit 30-year lows against the dollar, and is trading at a big discount to the euro, creating significant tailwinds for companies such as Burberry that report their results in sterling.
Brand of UBS said in a report last week that the weaker pound would give the struggling Burberry some relief, with first-quarter retail sales — to be published Wednesday — set to be virtually flat year-on-year at 409 million pounds, or $587 million.
It may be a benefit, but Bailey still admits he was disappointed by the country’s decision to leave.
“This is certainly not the result we were looking for, but having said that, we now need to make the best out of it and there’s a lot of work to be done. We need to establish how and where this is going to impact businesses and people and individuals.
“Burberry also creates globally, and we’re very used to dealing with different jurisdictions and with many complex parts of the world, so of course we will get through any changes. We now have to make the most out of it,” he said, adding that his long-term vision remains in place. “I hope to continue to have growth, sustainable long-term growth, for all of our investors and to make sure that all our teams continue to be excited and inspired by all the magical things the we work on.”