- Finance chief also replaced; shares rise 4.2 percent in London
- Changes ‘set company in stronger direction,’ analyst says
Burberry Group Plc’s Christopher Bailey will hand his role as chief executive officer to industry veteran Marco Gobbetti and return to steering its creative direction, ending a two-year experiment to combine the positions that led to falling profits and slumping shares.
Gobbetti, who over two decades has worked at luxury labels including Givenchy, Moschino and Bottega Veneta, will replace Bailey next year in a shake-up that also includes the departure of finance chief Carol Fairweather. Burberry shares closed up 4.2 percent at 1,211 pence after rising as much as 7.2 percent.
In making the changes, Burberry is acknowledging the difficulty of being a details-driven CEO while simultaneously handling the creative sweep of designing. In his dual role, Bailey had struggled to contend with subdued luxury demand from Paris to Hong Kong that led to two years of declining profit and its biggest cost purge in years.
“It’s clearly a step forward and sets the company in a stronger direction,” said Luca Solca, an analyst at Exane BNP Paribas. “Christopher is probably more of a designer than a CEO, both jobs are very demanding. Combining them in one person is a bit of an impossible burden.”
It’s the latest bout of management turnover in the beleaguered fashion industry, following a move by Ralph Lauren Corp. to hire Coach Inc.’s finance chief. Struggling German suitmaker Hugo Boss AG has promoted its finance chief to lead a turnaround effort there, while Gianni Versace SpA has replaced its CEO, hiring Jonathan Akeroyd from Kering’s Alexander McQueen.
Bailey led the management search, he said in a Bloomberg TV interview, yet wasn’t intending to hire a CEO at the outset. He said he’ll share responsibility for strategy with Gobbetti -- whom he knew only by reputation previously -- adding that the incoming chief “is clearly supportive of” Burberry’s current direction.
Gobbetti, 57, joined women’s fashion brand Celine in 2008 and with creative director Phoebe Philo boosted revenue at the 71-year-old label to about 600 million euros ($663 million), according to Exane BNP Paribas estimates. At Burberry, he will face the glare of investor scrutiny as he seeks to revive a much bigger company whose market value has shrunk by about 3 billion pounds to 5.4 billion pounds in less than 18 months.
“Marco will have to prove himself in a much larger company than Celine,” Solca said.
At Celine, the duo of Gobbetti and Philo created a loyal following of customers dubbed “Philophiles” who embraced the brand’s elegant, minimalist aesthetic while snatching up silk blouses and tote bags like the $1,700 Phantom. Burberry embodies British country life with its iconic plaid scarves yet more than a decade ago fell victim as less-fashionable, lower-income Brits known as “chavs” wore the brand, hurting its image.
Handing the CEO’s role to Gobbetti returns Burberry’s management structure to where it was before Angela Ahrendts left to join Apple Inc. in 2014. Ahrendts more than doubled sales in almost eight years at the helm, yet Bailey’s been unable to maintain the growth as demand for luxury fashions wilted. He’s moved to eliminate sub-brands and make clothes available instantly after the catwalk shows, yet first-quarter sales are expected to remain in decline, according to analysts polled by Bloomberg.
Burberry shares have fallen 19 percent since the day Bailey added the CEO role to his position as creative chief. His pay package fell to 1.9 million pounds in the year through March from 7.5 million pounds a year earlier.
As CEO, Gobbetti will earn a basic salary of 1.1 million pounds, plus expenses. He can also earn double that amount in bonuses and share awards worth 325 percent of his salary.
Replacing Fairweather as CFO will be Julie Brown, who currently holds the same position at U.K. medical-devices company Smith & Nephew Plc. Brown, 54, will also hold the role of chief operating officer and will join in early 2017, Burberry said. Operations chief John Smith said in June that he will leave by next summer.
Burberry is also giving Bailey the title of president. In the interview, Bailey deemed the shake-up an “evolution of my role.”
“I still am going to be leading this company,” he said. “It’s a partnership.”