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Burberry: ‘An Old New Company’

During my recent trip to London, I hosted the CNBC European Business Leader Awards ceremony where a lady by the name of Angela Ahrendts was named Business Leader of the Future. What’s so interesting is that she is the CEO of Burberry.

You’re probably familiar with Burberry, the British luxury fashion company founded in England over 150 years ago. Even if you don’t know the name, you would likely recognize its trademark black, tan and red check pattern that is widely used in its clothing, fashion accessories and other products. The once small label has been transformed into a world-renowned brand worn by celebrities and royalty alike.

I found it fascinating that the CEO of such a long-established company was named business leader of the future, and I think it is an interesting look at how companies that have been around for generations must adapt to the changing world. Ahrendts, who took over as CEO in 2006, told me Burberry is an “old new company,” which I thought characterized it well.

Going Global and Younger

Two of Burberry’s current strategies jumped out at me. First, in keeping with a theme we’ve discussed often in Investor Brief, the company is looking outside of the U.S. and Europe for most of its growth. I don’t think it will surprise you to learn where the company is focusing.

According to Boston Consulting Group, China is on course to become the world’s largest luxury market within the next five to seven years. Burberry currently has 44 stores there and is looking to increase that number. “The recovery has been faster in luxury than traditional sectors,” Ahrendts told me. “The emerging markets that were impacted less are recovering wonderfully.”

In addition to overseas endeavors, Ahrendts is planning to revamp the company in the U.K. ahead of the 2012 Summer Olympics, which will be in London. Burberry has been reevaluating the idea of its target consumer, going after a customer that is more “cross-cultural and cross-generational.” Interestingly, the company has had success in reaching out on social media platforms to introduce its core products to new customers.

The revamp also means letting go of what isn’t working, something many companies must consider after the global recession. For example, with sales down 37% in Spain amid tough conditions, Burberry will shut down its stores and facilities there.

The company performed well in 2009 during the all-important holiday season, and since then Burberry has reported sales ahead of expectations and maintained an optimistic outlook. And investors certainly like what they see. Burberry’s shares, traded on the London exchange under the symbol BURBY, are up 120% in the last 12 months, including a 21% gain in the first quarter.

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