Shares in Burberry dropped by more than 8.5% yesterday following the release of the luxury brand’s latest trading update, which failed to meet analysts’ expectation, and the lack of news surrounding the replacement for outgoing chief creative officer Christopher Bailey.
Yesterday the business revealed that Q3 retail revenue had dropped -2% though like for like store sales were up 2%. It said its performance had been dragged down by the UK, which during the prior year had been enjoying an uptick in tourist spend as wealthy travellers to the UK took advantage of sterling’s weak position following the Brexit vote. However sterling has since stabilised and that boost in sales has waned.
Analysts were hoping for news of a successor to Christopher Bailey who is due to step down formally from the Burberry board in March but remain with the business in a consulting capacity until the end of the year. However no news was forthcoming other than reassurances from CEO Marco Gobbetti that the business was making “good progress” with its strategic vision of positioning the brand firmly in the luxury space.
While Gobbetti has been reviewing Buberry’s stores and wholesale accounts, it is felt that the success of that strategy will hinge upon who is at the helm creatively. Names in the frame include Céline’s Phoebe Philo who announced her departure from the French luxury house, previously headed by Gobbetti, before Christmas.
Philo will stand down in March after showing her final collection at Paris Fashion Week but it was made clear at the time of her resignation that she had no plans to move to another fashion house immediately, however that doesn’t rule her out for the role given the length of Bailey’s departure plan and that she is likely to be placed under a non-compete by Céline owner LVMH for at least a year.
Another credible candidate emerged yesterday in the form of British menswear designer Kim Jones, who revealed that his show taking place in Paris today will be his last in his position as artistic director of menswear at Louis Vuitton. Jones had previously been linked to a potential role at Versace but the chance to head up the entire Burberry brand could be tempting, though it is not known how far talks with Versace have advanced. He too, though, is likely to be subject to a non-compete clause.
Other names to have have been linked to the role include Coach creative director (and another Brit) Stuart Vevers and Riccardo Tisci (not British but a graduate of Central Saint Martins) who has yet to announce his next move after standing down from Givenchy almost a year ago. Alber Elbaz, who has not taken another role since his fall-out with Lanvin, and Bottega Veneta’s Thomas Maier are also thought to be in the frame.
“The appointment of a worthy successor to Christopher Bailey who is capable of writing a new chapter for Burberry will be key for the midterm investment opportunity,” said Luca Solca of BNP Paribas in a statement yesterday, who went on to add that it would take at least 18 months from the appointment being made to any “organic growth” being seen.
Shares dropped 8.5% at close of trading yesterday to £1,619 and had fallen further today to £1,589 at the time of writing, Gobbetti, however, has made it clear that he will not be rushed and he wants to secure the right candidate regardless of timing. If he lands either Philo or Jones, for instance, it should be worth the wait.