GO
Loading...

Angela Ahrendts leaves Burberry for Apple, Christopher Bailey to take over

Burberry Group's long-standing chief executive, Angela Ahrendts, is moving from Bond Street to Silicon Valley following the announcement that she is to leave the luxury fashion group for a new post at Apple.

The company said that Ahrendts would step down by mid-2014, after which time Chief Creative Officer Christopher Bailey would be appointed to the dual role. He will also be joining the board in due course, the company said.

Apple announced Tuesday that Ahrendts will take on the new post of Senior Vice-President of Retail and Online Stores, reporting to the high-tech company's CEO, Tim Cook.

(Read more: World's top female policymakers)

Burberry shares were down 5.5 percent in midday trade in London as investors showed concern over the future direction of the group following the long tenure of Ahrendts, who was seen as a key to turning the brand round and returning it to the luxury end of the market.

Burberry tried to calm investors by emphasizing that strategy would not change once Bailey became CEO, and that the firm was still pleased with its performance in China. Bailey said: "We have a clear strategy to build on, an increasingly powerful brand and an inspiring management team."

(Read more: Burberry confident in China despite luxury crackdown)

Bailey's appointment makes him the first openly gay chief executive of a publicly listed company in either the U.S. or U.K. Tim Cook, chief executive of Apple, is widely believed to be gay, but has never officially outed himself, as Todd G. Sears, founder of OUT Leadership, pointed out.

Bailey's appointment was hailed as a "turning point" by U.K. LGBT association OUTstanding in Business, which is supported by Lord Browne,the former chief executive of BP who only came out after leaving the company. Browne has said that the business world is still "more intolerant of homosexuality" than other professions.

The Chinese government began a crackdown on luxury purchases and ostentatious extravagance last year by banning banquets and television and radio advertisement for expensive goods, which has started to hit the luxury sector.

In a statement on her move, Ahrendts said, "Burberry is in brilliant shape. I am confident that Christopher, as one of this generation's greatest visionaries, will continue to lead Burberry to new heights."

Burberry chairman Sir John Peace added: "I have no doubt that Christopher's vision and leadership,with the excellent management team in place, will keep Burberry on the forefront creatively, digitally and financially."

(Read more: What Burberry is doing right that other luxury retailers are not)

However, investors appeared not to share Peace's optimism. Shaun Rein, managing director of the China Market Research Group, said he was not convinced Bailey, a creative, could take on the task of ensuring Burberry grew in China.

"The next nine months is going to critical for Burberry's long-term strength in China, its key long-term market, and I'm kind of concerned that they will have a CEO whose mind might not be on the long-term growth of China," he said.

Analysts said that Burberry needed to decide which market it was going to target in the emerging world. Francis Gouten, director of Gouten Consulting, told CNBC, "You have also now two different categories of consumer in China. You have the upper market, with the very rich people, they want the quality, they want the service; and you have and the lower part market looking for logos and accessories."

The Chinese government began a crackdown on luxury purchases and ostentatious extravagance last year by banning banquets and television and radio advertisement for expensive goods, which has started to hit the luxury sector.

There was also concern on where Burberry was positioning itself in the luxury market. "They (Burberry) need to create a better brand potion: are they more luxurious than Louis Vuitton or do they compete more with Coach?," said China Market Research Group's Rein.

"They're in that odd position in the middle, so they need some strategic help. "

"I would go down-market, because consumers are either trading above Louis Vuitton - going for Bottega Veneta, Hermes and Chanel - or they're going much cheaper. So anything that is at the same position as Louis Vuitton doesn't do very well. "

While investors were concerned Tuesday about Burberry's under its new CEO, Pierre Mallevays, managing partner at Savigny Partners, argued that Bailey could be a good choice of successor to Ahrendts.

"One of the key challenges for the group going forward wil lbe to keep a harmonious balance between the luxury side and the more affordable part of the business," he said. "With his creative background, Christopher will be more sensitive to that than most."

Bailey himself obviously concurred with Mallevays thinking. "We are a design-driven organisation, so it is a complete thrill for me to be able to take that innovation take, that design and creative head, and to marry it with the commerce side of our business, to become even more united as we thrust ourselves into this next decade," he said.

Burberry announced 17 percent growth in underlying retail sales in the six months to the end of September, and total revenue rose 14 percent to £1.03 billion ($1.65 billion).

— By CNBC's Kiran Moodley, additional reporting by Catherine Boyle. Follow Kiran on Twitter @kirancmoodley