Burberry is encountering the standard volatility of a prestige brand that is often hidden in luxury groups such as LVMH and Kering. The only difference here is that Burberry must operate in the eye of the public market.
Without a parent company like LVMH or Kering, Burberry is unable to hide the inevitable ups and downs of operating a luxury business.
Whereas Gucci and Louis Vuitton are afforded the ability to strategically re-align without the peering eyes of Wall Street, Burberry must navigate brand challenges alongside the myopic reactions of an ever-changing share price.
In contrast, Bernard Arnault, the chief executive of LVMH, has a proven track record of building luxury goods brands and creating financial value for decades, not quarters. He would not sacrifice the long-term value of the Hermès brand for short-term profits.
The history of this industry is littered with brands that have lacked the discipline to say ‘no’, and have paid the price.
Gucci couldn’t say ‘no’ to penetrating markets with extension lines and licensing deals that in the end proved to be too much too fast. The brand momentarily lost its restraint, and had a costly return to favour.
Taking back the Burberry image
For luxury brands, growth is both an opportunity and a threat and Burberry knows that all too well.
In 1998, the label had 32 licensees around the world. The iconic British brand had lost control of its image by allowing other companies to manufacture an inconsistent host of products under the Burberry name for example dog leashes, kilts, and the infamous checkered cap.
The brand became synonymous with football hooliganism as the English terraces embraced the camel, white and red pattern as their uniform for violence.
When restaurants and bars began refusing entry to those in a Burberry outfit, possibly prompted by Daniella Westbrook’s decision to dress head to foot in Burberry check while clutching a Burberry-clad baby prised from a Burberry pram, the brand’s luxury status was thought to be irreversibly ruined.
So when Burberry finally did return to full glory, the brand vowed to learn from its mistakes.
To judge the outgoing Burberry chief executive Christopher Bailey on short-term profits and the volatility of a daily share price is to misunderstand his impact on Burberry..
Of course, commercial support in the form of Burberry’s new CEO Marco Gobbetti will only strengthen Burberry’s position and ensure Bailey continues to flourish in his chief creative officer role to which he returns.
We’re used to seeing great fashion partnerships.
From Dominico De Sole and Tom Ford to Yves Saint Laurent and Pierre Bergé, the luxury business has been built upon the symbiosis of commercial and creative minds alike.
Identifying Bailey’s leadership partner is an important step in the brand’s continued growth. But what matters for a luxury brand is sustainable growth, not the pressures of quarter-on-quarter increases.
That pressure is what led to Burberry’s dramatic over-extension in the 1990s and its ultimate oversaturation. For the new Burberry executive partnership it really has to be: never again.