Burberry is struggling. The iconic British brand has been having a rough time of it for a while now, thanks to its less-than-lust-worthy offerings, an absence of “it” bags, executive-level troubles, squabbles over pay packages, and a tough-going attempt to adopt a See Now-Buy Now model.
Things have been influx since former chief executive Angela Ahrendts left for Apple in 2013, and the brand’s creative director Christopher Bailey stepped into the dual role of chief creative and CEO. Since then, Bailey has consistently struggled to contend with subdued luxury demand from Paris to Hong Kong as he sought to reverse the house’s ever-declining profits.
The brand – known for its trench coats and camel-colored checkered print – has been in swift decline, after all, and the last of a seasoned CEO has not helped the cause. Bailey’s double duty as CEO and creative director of Burberry always looked “as unwearable as one of the fashion label’s lace shirts,” per Bloomberg.
And Burberry’s announcement last August that it would replace Bailey-as-CEO (Bailey was reportedly ousted from the role following a vote by the brand’s board members) with Marco Gobbetti, the former head of Celine, did little to subdue the growing concerns about the state of the brand. (The announcement, however, cause Burberry shares to jump as much as 7.2 percent).
With the CEO role handled, the brand can focus on other pressing matters, such as the sums it plans to pay to new finance boss Julie Brown and to Bailey, who handed the executive reigns to Gobbetti earlier this month.
As reported last month, the Investment Association – the London-based trade body that represents UK investment managers – issued a so-called “amber alert” to its members ahead of Burberry’s shareholder meeting in early July. Institutional Shareholder Services also urged investors to vote against the luxury fashion group’s remuneration report, particularly its plans to pay Brown and Bailey “excessive” sums. The criticism over pay comes after more than half of Burberry’s investors voted against Mr. Bailey’s $25.7 million pay package in 2014.
Burberry has since moved to sweep the most recent row under the rug with Brown opting for a pay cut (she has refused nearly $2.1 million — almost half of the total) and the board scrambling to explain its decision to hand a $6.9 million share award to Bailey. Burberry’s board has produced a “report card” on Bailey’s progress in four key areas – including “strategic development” and “financial performance” – which it has said justifies the award.
Moreover, Burberry chairman, Sir John Peace – who is planning to exit the brand in the near future – has fiercely defended Bailey. It was largely his decision to combine Bailey’s role as chief creative designer with chief executive after Angela Ahrendts quit to run Apple’s retail operations in 2013.
In his introduction to the brand’s annual report, which was released in June, Peace stated: “Since taking on the combined role of chief creative and chief executive officer, Christopher has made significant progress against a backdrop of challenging market conditions.”
Yet, underlying all of the financial and employment-related turmoil is maybe the most pressing and troubling of all things: The fact that its garments and accessories are not all that appealing as of late. The board is hoping that Bailey – given his newly focused role as a creative head only – might be able to fix this. Its push for See Now-Buy Now is only going to work, after all, if consumers actually want to wear Burberry’s offerings, and as of now, that does not seem to be the case.
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