Christopher Bailey Bids Farewell to Burberry CEO Role

Christopher Bailey and guestStudent Fashion Week,
Christopher Bailey
Rex

Christopher Bailey is staying put at Burberry — at least for now.

Bailey may have bid the financial world an emotional farewell as he prepares to hand over the chief executive officer mantle to Marco Gobbetti in July, but it’s clear Bailey remains committed to Burberry — and is ready to refocus fully on all things creative.

He said Thursday, during an analyst presentation following the 2016-17 results announcement, that a highlight of his tenure as CEO was recruiting Gobbetti, the former Céline CEO who joined Burberry this year as executive chairman for Asia-Pacific and the Middle East.

Bailey said Gobbetti’s appointment, which takes effect July 4, “will allow me to redouble my focus on design, product and telling stories.” Bailey will continue as chief creative officer and take on the new title of president in July.

He had held the controversial dual role of chief creative officer and CEO since 2014, following the departure of former CEO Angela Ahrendts for Apple.

Indeed, Bailey used his presentation to drive home his commitment to the FTSE 100 company and to quell all doubt about his future there. He said he planned to work closely with Gobbetti as the company entered its next chapter, and he’s approaching the future with “huge optimism” for Burberry.

Profits for the one-year period ended March 31 fell 7.3 percent to 286.8 million pounds, or $375.7 million, in line with analysts’ expectations, while revenue in fiscal 2016-17 was down 10.4 percent on a reported basis, and 2 percent on an underlying one to 2.77 billion pounds, or $3.63 billion.

The past year had been a tough one for Burberry, which 12 months ago laid out a restructuring and cost-savings plan aimed at honing the brand for a future of slower growth for luxury goods and for a digitally engaged, want-it-now customer base.

Shares in the company rose steadily throughout the day, closing up 5.2 percent at 17.26 pounds, or $22.33.

Burberry also announced a 5 percent increase in its full-year dividend at 38.9 pence, or $0.50, pointing out that its key revenue driver, the retail business, climbed 3 percent on an underlying basis.

Adjusted profit before tax was up 42 million pounds, or $55 million, to 462 million pounds, or $605 million, in line with guidance. Adjusting items included lower beauty revenue after Burberry slashed the number of wholesale distributors from 3,500 to 35, and costs associated with the transfer of beauty operations to Coty, which is set for October.

Profits were also dented by planned restructuring charges of 20.8 million pounds, or $27.2 million, relating to Burberry’s new cost and efficiency program, in line with guidance.

Burberry also announced a new 300-million-pound, or $388 million, share buyback program to be completed by March 31, 2018, paid for partly with money from the Coty deal.

In the second half of the current fiscal year, Burberry will receive a total of 180 million pounds, or $233 million, from Coty for the long-term exclusive global license and related transfer of the beauty business, including gross assets.

There are some clouds on the horizon.

It remains unclear whether Burberry will go ahead with its plan, announced in late 2015, to build a state-of-the-art trench coat factory in Leeds, England. The initial investment in the factory was set to be 50 million pounds, or $77.2 million.

Burberry had already found the land and had planned to open the new facility by 2018. Dubbed Project Artisan, the factory was meant to replace Burberry’s two Yorkshire workshops that make its heritage trenches.

During a call today, chief operating officer and chief financial officer Julie Brown said while Burberry remains committed to Yorkshire, the company has been taking its time making a decision about the fate of Project Artisan. (This month, it announced plans to move 300 back-office jobs from London to Leeds, Yorkshire, as part of its cost-savings and efficiency drive.)

“We’re considering a number of options,”
said Brown, adding that there were “Brexit implications,” as well as input and decisions to be made by the incoming CEO. The project was announced long before Gobbetti’s appointment and Britain’s vote last summer to leave the European Union.

As it mulls the future of its Yorkshire factories, Burberry said it is putting a renewed focus on bags, sales of which grew 16 percent year-on-year in 2016-17. The new DK88 bag, whose design is inspired by the brand’s heritage trench, will get its own stand-alone campaign and store windows this month.

Bailey said there would also be a sharper focus on the bag category going forward, with plans to elaborate on newness, but also on key shapes, core styles and add-ons to product families.

Brown said Burberry sees accessories, which generate 40 percent of revenue, as a high-potential growth category.

Overall, Bailey said the company would be taking “a more strategic approach to key categories,” such as handbags, as part of its strategy to nurture repeat business from local customers and to drive sales per square foot in stores, an area where Burberry has been lagging behind its peers.

“A greater proportion of my time will be spent on product,”
Bailey said. “We can do so much more.”

Burberry also plans to spend some of its 140 million pounds, or $240 million, in this year’s capital expenditure on store refurbishments, rather than store openings, as it seeks to consolidate its retail network after years of rapid expansion.

On the digital front, Burberry is working to bring the worlds of brick-and-mortar and online ever closer, with new services such as same-day delivery in 200 cities, instant, in-store collection services for online shoppers and online deliveries sourced from distribution centers as well as stores.

Some 70 percent of Burberry customers’ buying decisions are influenced by digital, and the brand has made a series of moves as a result.

It has launched a local site in China and unveiled a redesigned website for desktop and mobile. It has also introduced a Burberry customer app in the U.K.

The company said while its guidance for full-year adjusted profit before tax remains unchanged at constant exchange rates, it is expecting a 30-million-pound, or $39 million, dent in reported adjusted PBT due to the adverse impact of currency fluctuations.

Burberry based its estimate on April 28 effective rates.