With its CEO on the exit ramp, what next for Burberry?
The shock announcement that Marco Gobbetti, Burberry CEO, was to leave at the end of this year sent shares in the company spiralling downwards yesterday wiping £1bn off its market value.
While analysts sung Gobbetti's praises, due to the robust share price and profit margin rises, his departure was said to be rather sudden after just over four years in the position. He is due to leave at the end of the year to return to Italy, be closer to his family and take up a leadership role at luxury footwear brand Salvatore Ferragamo.
A note from analysts Jefferies said in response to the news: “The fact the search for a successor is to start now and that Gobbetti’s unvested shares will lapse in full points to a sudden decision in our view”.
Did Gobbetti jump before he was pushed? Most agree it seems unlikely Gobbetti was forced out and are taking his line that, after 20 years away from his home country and being unable to visit family during the pandemic, at face value.
However Gobbetti was only four years into his five-year plan of taking Burberry further up the luxury market. He wanted to reposition Burberry in the designer stratosphere, shedding wholesale partners and focusing on full-price sales in the process, but recent collections have been met with lukewarm responses, particularly from the influential European markets.
Prior to joining Burberry, Gobbetti was at luxury leather group Celine, where he was chairman and chief executive from 2008 to 2016. He previously worked at Givenchy and Moschino. It was while at Givenchy that he worked with Riccardo Tisci, a fellow Italian, whom he hired as Burberry's chief creative officer in spring 2018.
A statement from Burberry said: “We anticipate Marco will remain with Burberry until the end of the calendar year. In that time, he will work with Chairman Gerry Murphy to provide full support to the executive leadership team on an orderly transition.”
Gerry Murphy, Burberry Chairman, responded: “I would like to thank Marco for his partnership and the immense contribution he has made to Burberry. He has had a transformative impact and established a clearly-defined purpose and strategy, an outstanding team and strong brand momentum.
"The Board and I are naturally disappointed by Marco’s decision but we understand and fully respect his desire to return to Italy after nearly 20 years abroad. With the execution of our strategy on track and our outlook unchanged, we are determined to build on Burberry’s strong foundations to accelerate growth and deliver further value for our shareholders.”
The big question now is whether Tisci will stay and are his designs having a truly transformative effect on the brand? Unfortunately, COVID has distorted the results, but Burberry’s strength in China has obviously been a boon for them recently with that economy bouncing back faster.
Tisci studied fashion design at Central Saint Martins and is known to be a fan of the British capital and British youth culture, but he too is said to have found it difficult not being able to visit his large Italian family during the pandemic.
Whatever Tisci decides, the immediate priority is to replace Gobbetti. A rudderless fashion PLC is vulnerable to takeover (LVMH will no doubt be watching closely), so who should Burberry go for?
Whoever it is needs to rethink the strategy and appeal more to domestic markets with tourism likely to be curtailed for a number of years. Burberry has been so focused on Asia and tourists and arguably is still somewhat riding on the momentum previous CEO and Chief Creative Officer, Christopher Bailey, instilled into the brand.
During his tenure, Tisci has done that insecure thing the new creative brooms do, of sweeping away the work of his predecessor, rather than building on it. The Britishness that Bailey finessed has been replaced by a bland, high fashion, try-hard brand that feels neither original nor attractive.
Burberry has turned into one of those brands where anybody at the company, who may disagree with the direction, stays silent because they’re told it’s selling. (Indeed it is, Burberry revealed that its sales were up by 32% for the first three months of 2021, enabling it to beat analyst expectations). Margins were 15.4% when Gobbetti arrived, they were 17% when he resigned.
Despite the sales growth, Burberry needs to work on desirability (and those all-important leather goods, where, even with recent launches such as the Olympia bag, it remains weaker than French and Italian luxury rivals) in order to push through these higher prices and to continue to reduce discounts. It has also rejigged its store network and is opening a huge new store above Knightsbridge tube station, but if China stops buying they are in real difficulty.
Gobbetti seems to have left the turnaround half done and it’s difficult really to assess his impact given that a lot of what he did will have been masked by the pandemic. So who can take it on? There is talk that Jonathan Akeroyd will be tapped (formerly CEO at Alexander McQueen and now at Versace), who would seem a good fit and, maybe just as Gobbetti wanted to return to Italy, Ackroyd may be interested in a return to London.
More interesting, perhaps, for fashion watchers will be who takes over if Tisci does follow Gobbetti out of the door. Before Tisci was appointed a lot of industry commentators were desperate to see former Celine creative chief, Phoebe Philo get the role. Philo had returned from Paris and had wanted to spend more time with her family in London. She'll have had plenty of time to do that during lockdown, so is she ready for a return?
Maybe fellow British creative director Clare Waight Keller would fancy a go, following her departure from Givenchy, where she had replaced Tisci. Or perhaps Christopher Kane might be interested to take up the role now that his brand is independent.
As we've said, whoever it is, really needs to be good at leather-goods, so could Jonathan Anderson be tempted away from Spain's Loewe or Daniel Lee from Bottega Veneta, where both have had truly transformative impacts? Stuart Vevers might be tempted away from Coach and has a strong track record in leathergoods, having creatively led Mulberry and Loewe before heading to the US to join Coach. There are some exciting possibilities.
Despite yesterday's shock drop at the news of Gobbetti's departure, he had built value for shareholders as Burberry shares had gained 37% since his appointment to Friday’s close price. That said though, their growth was still behind that of other luxury brands, so there's room for improvement.
There's also room for improvement in sales. Affluent consumers have money in their pockets and the luxury market is flying; Burberry just needs an image and product that fires people’s imaginations. Beige does not a brand make.