Shares in Burberry (LSE: BRBY) fell by more than 6% in early trade this morning, following the group’s first-half trading update and some rather significant news for shareholders.
CEO Angela Ahrendts has been widely praised in recent years for overseeing the transformation of Burberry into “a world-leading digital luxury brand”, but will leave the company by mid-2014 in order to take up a new position at Apple. She stated: “Burberry is in brilliant shape, having built the industry’s most powerful management team, converted the business to a dynamic digital global retailer, created a world class supply chain, state of the art technology infrastructure, sensational brand momentum and one of the most closely connected creative cultures in the world today.”
Her replacement, Christopher Bailey, has been chief creative officer since 2007 and will take up the dual role of chief creative and chief creative officer upon Ms Ahrendts’ departure, commenting: “[I] feel privileged to be keeping my role as chief creative officer, as I believe that creativity and innovation have been at the heart of our success in the last ten years and will be even more so in the decade ahead.”
It is a sign of how well regarded Ms Ahrendts is that the share price has fallen despite a largely positive trading update. Total revenue increased 14% to £1.03bn on an underlying basis, while retail revenue grew 17% with online outperforming in all regions. Indeed, the group partnered with Google for a brand campaign named ‘Burberry Kisses’, while the Spring/Summer 2014 runway show was filmed on iPhone 5s.
Wholesale revenue did see a decrease of 7% on an underlying basis to £244m, but that doesn’t take into account Burberry’s Beauty department, which saw improvements following a “complex transition period” in the first half of the year, as well as a successful launch of ‘Brit Rhythm for Men’ in September.
On the update, Ahrendts commented:
“As we look forward to the second half, we expect the external environment will remain uncertain and currencies volatile. Our team is united in focusing on delivering a compelling brand message and exceptional product and service to our customers over the all-important festive periods, while continuing the momentum around Beauty.”
Still, the loss of the CEO that drove the company’s success over the last decade or so is undoubtedly a blow for shareholders, who will have to decide whether the fact that her replacement will be hired internally should continue the momentum that has been seen in recent years.
