Burberry boss Angela Ahrendts' decision to step down wipes £536m from value of fashion brand
Burberry chairman Sir John Peace was holding urgent talks with investors after chief executive Angela Ahrendts announced plans to step down, wiping £536m from the value of the fashion brand.
Britain’s highest paid woman – who earned total pay of £16.9m last year – has lined up a job running the retail arm of technology giant Apple.
But Peace’s unconventional choice of replacement in chief creative officer Christopher Bailey, pictured below, has raised eyebrows, sending the shares down 7.63 per cent or 121p to 1490p.
The 42-year-old Yorkshireman, who has no experience running a company and does not even sit on the main Burberry board, will continue with his creative duties as well as leading the firm.
One analyst note from Morgan Stanley, warned: ‘We anticipate some investor concern about combining the chief creative officer and chief executive roles which are both time consuming and require very different skill sets.’
However it did concede: ‘There will undoubtedly be relief that Mr Bailey, the driving force behind the brand for the last 12 years, is staying.’
Ahrendts has had nearly eight years at the helm. The value of the firm, famous for its camel, red and black check pattern, rose from £1.7bn when she became chief executive in June 2006 to £6.5bn.
Sales have also increased from £743m in 2006 to £2bn in 2012.
Ahrendts said yesterday: ‘I am so proud of what we have accomplished but am even more proud to turn the reins over to what I feel is this generation’s greatest visionary.
‘I have always known it – that the future of this company is with Christopher at the helm. I have such peace being able to exit stage left at this point.’
While the firm will not disclose Ahrendts’ exit package, she has been amply rewarded for her contribution over the years.
She built up a massive shareholding of around 425,150 shares in Burberry, currently worth nearly £6.5m, and has around 1.8m share options worth another £27.7m.
It is understood she will lose any options which pay out, or ‘vest’, after she leaves next year, but it is expected Apple would compensate her for that loss. While the scale of the financial carrot being dangled by Apple is not known, former Dixons chief John Browett was given a £35m golden hello last year, when he took the same job.
However the appointment did not work out and he left after only six months. Ahrendts will be the highest ranking female in an all male executive team. Ahrendts will leave Burberry at a critical time. Only last week she warned the slowdown in Burberry’s key Chinese market may not be a blip. She will also leave before new finance director Carol Fairweather has completed a full year, the new beauty division has been bedded in and the Japanese business has been integrated.
There has been a trend among bosses to jump ship ahead of a change in fortune, as highlighted by Sir Terry Leahy’s timely departure from Tesco ahead of its first profit warning in 20 years.
It is thought the Burberry board considers this to be a different case and that the firm is in a strong position. It also thinks that Bailey has a good business brain and claims he has long been the preferred choice in terms of succession.
Fairweather stressed: ‘Christopher has got a great team around him as he steps up to the role.’
Bailey said: ‘We have done a lot of dreaming and have made those dreams into very solid strategies. But we have only just started dreaming, we have got so many excitements ahead of us.’
In first-half trading total sales rose 14 per cent to £1bn or up 13 per cent on an underlying basis.
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