In a desperate attempt to steal London Fashion Week last September, Burberry’s marketing team went into overdrive, plotting to “take over” various businesses in London.
For a few days, Bond Street Tube station became “Burberry Street”, the capital’s black taxis were covered in a new Burberry English rose motif and a popular greasy spoon cafe in north London was adorned with blue branding that became a central feature. of their newer designs.
The demonstration backfired.
While new creative director Daniel Lee thought it was a clever way to channel the brand’s distinctive British roots, many Londoners were angered by what was seen as one of the most egregious examples of “company creep”.
Others saw something potentially more dire: new evidence that a once trailblazing company had lost its way.
Burberry’s struggles predate the current regime by years, a double act involving chief executive Jonathan Akeroyd and Lee’s artistic talent. But instead of promising a return to catwalk dominance, Burberry has fallen further behind fashion.
Profits plummeted, debts rose and share prices fell; It left rivals, former executives and City experts asking where it all went wrong.
While Burberry’s shares are languishing at £10.32 (the cheapest in 12 years), there is fresh speculation about one company describing it as: “specific Star stock picker Nick Train’s article “In the context of the UK stock market” has once again become a takeover target of foreign predators and private capital.
There seems little doubt who the board holds responsible for this situation. Akeroyd, who announced a 40 percent drop in annual profits last month, waived his annual bonus of £2.3 million in addition to his annual salary of £1.1 million.
Danuta Gray, chairman of Burberry’s remuneration committee, said it would not be “appropriate” for Akeroyd to receive a bonus. In an age when rewarding failure has become all too commonplace in boardrooms, this was a rare public snub.
Giving finance chief Kate Ferry a bonus for her “excellent broad contribution” will do little to ease Akeroyd’s disappointment.
The question now is whether the writing is on the wall for a man swapping Versace for Burberry in 2022 and receiving a tear-jerking package in the process.
As part of his move from Milan to London, Akeroyd was given an upfront transfer payment of £6 million, with the potential to earn £11 million if certain performance benchmarks were met.
However, any change of guard at Burberry will be a decision for City grandmaster and chairman Gerry Murphy. Murphy’s much-celebrated retail acumen sees him splitting his time between Burberry and Tesco, where he was appointed chairman last year.
Did last week’s departure of marketing chief Rob Hanley herald more high-profile exits in the coming months?
The company was recently forced to deny it was considering Akeroyd’s potential replacement following reports on the Miss Tweed fashion blog that Murphy had begun secretly interviewing candidates.
Burberry responded with a firm denial: “We do not comment on unfounded speculation but to be clear, Jonathan has the full support of the Burberry board.”
Some question whether part of the problem lies in the large but lightweight board. “I don’t know anyone on this,” said one former non-manager.
Does a heavy hitter need to be ready to ask some tough questions?
Or is the bigger problem a lack of fashion sense at boardroom level? Only two in 10 non-executives worked in luxury goods.
Murphy’s retail experience is more DIY than DKNY. He spent nearly five years running B&Q owner Kingfisher and left in 2007, with its shares trading roughly where they were when he arrived. Meanwhile, there are only two Brits in a company where heritage is perhaps its most unique feature; One of them is an accountant.
Any further management changes are likely to reflect negatively on Murphy. Burberry has long been a company that has been making one drama after another, and that hasn’t changed since he took over from Sir John Peace in 2018.
The departure of Akeroyd’s predecessor, luxury goods master Marco Gobbetti, in 2021 caught the board so off guard that it appeared there was no successor in sight.
A year later, chief designer Riccardo Tisci resigned at the same time as finance boss Julie Brown left for drugs giant GSK.
On the other hand, there are serious doubts about the direction Burberry is heading under Akeroyd. Following last month’s bombshell, analysts examined the company’s strategy in detail.
Bernstein analyst Luca Solca said it was clear that Burberry was “materially underperforming in terms of peers and the market”, adding: “Whatever the reason, the plan to relaunch the brand is not working for now.”
Analysts at Citibank said: “The jury is still out on whether Daniel Lee’s brand aesthetic will lead to stronger commercial success and double-digit growth.”
Urging clients to sell the shares, UBS questioned whether the muted response to the brand refresh “means the turnaround may need to cost more to succeed”. He noted that Burberry “may need to increase its expenses and gross margin reinvestment.”
“Our conversations with selected wholesalers indicate that the price point is too high, leading to a decline in orders year on year, although some social media trends also do not indicate any ‘hype’ among consumers,” the bank added.
Fabio Becheri, a former executive at Gucci, argues that the problems started before Akeroyd but were made worse by his decision to increase sales of bags and other accessories.
He said: “Burberry has made crucial mistakes: Gobbetti appointed Tisci to create instant appeal with no regard for the brand DNA, and Daniel Lee works in the context of going luxury with an accessories-focused strategy, which is the wrong mandate.”
While Akeroyd acknowledged the company had fallen short of expectations, he also criticized the Government’s so-called tourism tax for hitting spending by overseas visitors. The administration also noted a broader slowdown in spending on luxury goods, especially among Chinese consumers.
There have been repeated questions about whether Burberry is overexposed to China, where it generates 30 percent of its sales. Can this situation continue despite rising tensions between Beijing and the West? Will Chinese customers still want to wear Burberry’s iconic tartans the same way they used to?
Train acknowledged the fall in Burberry’s share price was “a shame” and said concerns about weakening Chinese demand were “justified” but noted it “has every chance of joining the next rally”.
Until that happens, Akeroyd’s ambition to grow revenues to £5bn looks like a fantasy, especially considering its last annual turnover fell just shy of £3bn.
Burberry’s struggles are a stark contrast to the days when Burberry wowed the catwalks and the cheerful Kate Moss was at the forefront of advertising campaigns in the late 1990s.
A visit to the expensively refurbished store on Bond Street this week gave little sign that a return to the glory days was imminent.
On a sunny Wednesday afternoon, with only a handful of customers inside, the impeccably presented staff could be seen standing around looking bored. Even fewer customers walked away with a purchase.
London-based stylist Jamie, one of the buyers, confirmed that the designers had “made things a little more contemporary” while maintaining the “classic shape” of their clothes.
But Sæmundur and his girlfriend Tinna, both 25-years-old Icelanders, emerged empty-handed and clearly overwhelmed: “It’s a bit expensive and not really that exciting,” says Saemundur. “I’m not a huge fan, I know [Tinna] “He likes coats… my grandmother has something similar,” he adds.
As Burberry desperately tries to revive its image, it will need to convince customers that it represents the future of fashion, not its past.
Burberry declined to comment.