April 9 (Bloomberg) -- For years, fashion and luxury-goods companies have resisted putting creative and commercial control in one pair of hands. With the appointment of Christopher Bailey as chief executive officer, Burberry Group Plc aims to prove it can make the formula work.
After Bailey takes over the top job from Angela Ahrendts, who is leaving next month to run retail operations at Apple Inc., he’ll retain the role of chief creative officer. In that position, he has made Burberry the industry’s Internet leader while overseeing a reinvigoration of the company’s design.
“Bailey’s appointment is an acknowledgment that performance comes from creative leadership,” said Floriane de Saint Pierre, founder of a Paris-based recruitment and advisory firm bearing her name. For publicly traded luxury companies, it marks “a change of paradigm.”
Typically, only founders of closely held companies such as Giorgio Armani or Ralph Lauren have formally combined the creative director and CEO roles. The functions are more commonly split into double acts in the mold of Tom Ford and Domenico de Sole at Gucci, Marc Jacobs and Yves Carcelle at Vuitton -- and Bailey and Ahrendts.
On Oct. 15, the day the London-based company said Ahrendts was leaving, Burberry shares tumbled 7.6 percent, and they’ve fallen about 2 percent since then. At the time, analysts including HSBC’s Erwan Rambourg questioned Bailey’s ability to juggle the creative and CEO roles amid a slowdown in luxury sales, though Rambourg later said he believes Bailey can succeed.
In November, Burberry appointed Bailey’s long-time collaborator Luc Goidadin to the new role of chief design officer to oversee the day-to-day running of design activities. Bailey will continue to set the creative direction and vision of the brand, he said at the time.
Burberry shares rose as much as 4 percent to 1,429 pence as of 2:14 p.m. today in London. The company has a market value of about 6.3 billion pounds ($10.6 billion).
Burberry hired Bailey as creative director in 2001, initially of its Prorsum runway line. In 2009, he was promoted to chief creative officer, formally giving him control of all consumer-facing activities from product design to digital communication. He has helped set Burberry’s broader strategic direction since Ahrendts joined in 2006, according to the company, which declined to make him available for an interview.
The British designer, 42, had worked for Donna Karan in New York and for Tom Ford at Gucci in Milan. He has transformed Burberry from a fusty clothier best known for plaid-lined trench coats into a full-fledged luxury-goods company.
He introduced materials including python and products such as sheer rubber skirts and hand-painted bags to reboot the Burberry aesthetic, which he has called “disheveled elegance.” He enlarged the label’s offer to include men’s tailoring and children’s wear.
Bailey also helped lead Burberry -- and the luxury industry -- into the digital age. In 2009, a year before the advent of Instagram, Burberry introduced the Art Of The Trench, an online forum for people to post photos of themselves and others wearing the company’s coats. While competitors such as Prada and Marc Jacobs were still experimenting with e-commerce in 2010, Burberry let customers order clothes directly from its runway shows as it streamed them live online.
Burberry invests more in its digital business than other luxury companies, consultant L2 Think Tank estimates, and it has more Facebook fans than its top rivals. Burberry is also the only luxury-goods company that lets clients order online and pick up their purchases in stores.
Bailey “laid the groundwork for what the next generation fashion brand really looks like,” said Maureen Mullen, head of research and advisory at L2 in New York. “Burberry used to mean British and plaid. Now it means British, plaid and innovation.”
Burberry’s strategy has resonated with consumers and investors. In the year ended March 31, 2002, the company had pretax profit of 85 million pounds on sales of 499 million pounds. In 2013-2014, analysts predict earnings will reach 449 million pounds on revenue of 2.33 billion pounds, according to the average of 19 estimates. Since 2002, its shares have surged more than 500 percent while the Bloomberg European Fashion Index has more than tripled. Burberry reports annual results on May 21.
Don’t expect to see the rest of the luxury-goods industry rush to combine the creative and business roles as Burberry has, said Michael Boroian, president of recruiter Sterling International in Paris.
Bailey “is a special case” given his extensive experience with the company, Boroian said. “I don’t see it as a trend.”
While some creative directors such as Lanvin’s Alber Elbaz and Celine’s Phoebe Philo have increasing influence on commercial decisions, their clout corresponds to the success of their collections, said Boroian.
Still, creative and image director Hedi Slimane oversees all strategic projects at Saint Laurent and stamped his authority on the brand by dropping “Yves” from the label’s name in 2012, though the fashion house has a separate CEO. And jeweler Van Cleef & Arpels last year widened creative director Nicolas Bos’s roles to include CEO.
In the less rarefied world of sporting goods, Nike Inc. CEO Mark Parker started out as a footwear designer in 1979. Like Bailey, Parker didn’t have any board-level experience before taking the top job in 2006. Nike shares have gained more than 250 percent since Parker’s appointment.
“We have come a long way from seeing designers as a necessary evil,” said Fabrizio Ferraro, a professor at IESE Business School in Barcelona. Bailey is one of “a new breed of designers who are more business-friendly.”
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