Hit by China sales dip, Burberry frees up CEO Christopher Bailey to refocus on design role

British luxury brand names Marco Gobbetti, the boss of hugely successful fashion brand Celine, its new chief executive, after a period of destabilising change in which profits and sales have fallen

PUBLISHED : Tuesday, 12 July, 2016, 2:58pm
UPDATED : Tuesday, 12 July, 2016, 2:58pm

British luxury brand Burberry has recruited Marco Gobbetti, the Italian boss of French brand Céline, to succeed Christopher Bailey as chief executive next year, freeing Bailey to focus again on the design role that made his name.

Bailey’s dual roles of CEO and chief creative officer since May 2014 had worried some investors who felt he had too much on his plate. Burberry said he would retain his creative role and also take the title of president.

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Shares in the 160-year-old firm, down 24 per cent over the last year, rose by up to 7.9 per cent, their strongest day in three years.

“It was clear that the ‘dual role’ solution was not working, and that both the business and the share price had suffered,” said Exane BNP Paribas analyst Luca Solca. “This is a step forward for Burberry, where we perceived a need of reinvention and stronger direction.”

The Paris attacks have deterred tourists and demand from major markets such as China has fallen, with global sales growth seen sinking this year to flat to low-single digits.

In April the firm – famous for its camel, black and red-checked designs – reported a 10 per cent fall in annual profit and said it would overhaul its business, shrinking its product range and focusing more on handbags. It also gave a bleak outlook for the current financial year.

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Burberry said Gobbetti, 57, currently Céline’s chairman and CEO, will join in 2017 as soon as he is contractually able to.

Under the creative stewardship of award-winning designer Phoebe Philo for the past eight years, Céline has been one of luxury conglomerate LVMH’s fastest-growing and most successful fashion labels, generating around 600 million (HK$ 5.1 billion) in sales.

Gobbetti has over 20 years experience in the luxury industry and a track record of growing and developing brands including Givenchy, Moschino and Bottega Veneta, said Burberry.

He will be responsible for all commercial, operational and financial elements of the business, working in partnership with Bailey, who will oversee all elements of brand and design.

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Among the highest-paid FTSE 100 bosses, Bailey will not be taking a pay cut.

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Analysts say Gobbetti’s main tasks will include giving more coherence to Burberry’s fashion identity and boosting the brand’s desirability.

Céline is extremely profitable, market sources say: its strength is in leather goods where margins are the highest. Investors hope Gobbetti will bring the same touch to Burberry’s leather goods sales.

Critics say some of Burberry’s mistakes were self-inflicted as it sought to become a digital-age trailblazer but paying too little attention to the substance of its fashion message.

The firm has made destabilising changes in recent months, including bringing all its sub-labels, such as Prorsum, Brit and London, under one Burberry brand and regrouping its menswear and womenswear shows into one.

It has also been working to get new clothing and accessories more quickly to customers.

As part of its management shake-up, Burberry also said it had appointed Julie Brown to the new role of chief operating and financial officer. Brown, who is currently CFO at medical technology business Smith and Nephew, will join in early 2017 at the latest.

Investors and retail experts welcomed the handover, which they said would help Burberry cope with falling profits due to flagging demand for luxury goods in markets such as China and Russia.

Chinese sales have slowed, while Russian buyers have been slapped with economic sanctions and Middle East demand has cooled.