On Wednesday, Burberry announced Versace chief Jonathan Akeroyd would be its next CEO, naming a successor four months after the sudden announcement current chief Marco Gobbetti would depart for Salvatore Ferragamo at the end of the year.
When Akeroyd steps into the role next April, he will take on a company midway through a long-standing revival plan. The expectation is that he will continue to execute on his predecessor’s strategy to revitalise Burberry’s fortunes and reposition it as a top-tier luxury player. But he will need to demonstrate that strategy can deliver.
Akeroyd is a seasoned luxury executive; before joining Versace in 2016, he was chief executive of London-based label Alexander McQueen, a position he held for more than a decade. Under his leadership, both businesses grew significantly. His mandate at Burberry is similar to what he achieved at McQueen and Versace: fuel growth and profitability.
“We see the appointment of Jonathan Akeroyd as a relatively safe decision to ensure a smooth transition and execution next year,” said Thomas Chauvet, head of luxury goods equity research at Citibank.
When Gobbetti took the business helm of the British heritage brand in 2017, he began setting the framework for a broader turnaround: he hired star designer and former Givenchy creative head Riccardo Tisci to oversee creative direction, increased prices and tightened distribution, focusing on bolstering Burberry’s direct-to-consumer business in favour of lower-margin wholesale partnerships. The brand also rebooted its logo and invested in bolstering its leather goods offering, an important revenue-driving category within the luxury sector.
However, the company has still to demonstrate those efforts can accelerate revenue growth and expand margins. Its broader ambitions to become a British Gucci or Louis Vuitton are still very much a work in progress, and the house is lagging French rivals like LVMH and Hermès in its pandemic recovery.
At Burberry, Akeroyd’s first challenge will be to work on boosting profit margins, analysts said. While Gobbetti’s turnaround is “starting to bear fruit,” it’s happened at the expense of profitability, said Citibank’s Chauvet, noting that Burberry’s profit margin forecasts for 2022 are “well below” its best-in-class peers.
For the year ending Mar. 27, 2021, revenue was down 10 percent year-on-year, at £2.3 billion ($3.2 billion), reflecting the impact the coronavirus pandemic. The company’s still recovering from that impact. In its most recent quarter, retail revenue was down 4 percent compared with the same period in 2019, though comparable store sales were up 1 percent.
To be sure, Akeroyd has a track record of helping boost flagging brands’ fortunes. During his tenure at Versace, he instigated an overhaul of the house’s merchandising strategy, working closely with Donatella Versace to leverage the brand’s rich heritage in collections and capitalise on its strong brand awareness. It was a move that contributed to the house’s return to profitability, and, in turn, its $2.1 billion sale to Capri Holdings in 2018.
While Burberry’s Tisci and Akeroyd have not worked together previously, Chauvet said they were understood to know each other relatively well. “We believe this could lead to a fruitful collaboration next year,” he said.
Since the Capri acquisition, Akeroyd has focused on positioning Versace further upmarket, a similar strategy to the one Gobbetti has pursued at Burberry. The executive did away with lower-priced diffusion lines to focus on the brand’s main collection and, like Burberry, Versace has recently introduced a new signature print and focused on developing its accessories and bag collections. Under his leadership, brand revenue grew 20 percent, reaching $890 million in 2019.
“Jonathan’s focus at Versace overlaps nicely with the brand elevation strategy of Burberry, with many of the same plans already having being implemented, this potential reduces the risk of a ‘kitchen sink’ when he joins,” said a note from the Bank of America luxury research team.
Akeroyd leaves Versace with the brand’s longer-term revival plan also far from complete. Its ambitions to grow revenue to $2 billion remain a long way off, undercut in part by the pandemic. Revenue for the full year ending Mar. 27, 2021 was down 15 percent to $718 million, though sales have showed signs of recovery this year. In its most recent quarter, Versace reported revenue up 136 percent year-on-year on a constant currency basis.
In a statement, Versace-owner Capri said it remained “confident” about the brand’s long-term growth potential after Akeroyd’s departure. The company will “immediately” begin the search for Akeroyd’s successor, it said.
The executive’s appointment at Burberry is accompanied by a substantial financial package, including cash and share awards worth £6 million over the next four years to cover incentives forfeited by his departure from Versace. Akeroyd will receive an annual salary of £1.1 million, alongside a £50,000 annual cash benefits allowance and the possibility of millions more in bonuses.
Gobbetti will remain in his current role at Burberry until the end of the year, after which time company chairman Gerry Murphy will lead the company’s executive committee until Akeroyd joins in April.