Burberry investors got a severe hand-bagging this morning after its chief executive disclosed he was returning to Italy to manage shoe brand Salvatore Ferragamo. The British luxury brand saw its shares plunge to 2,024p at one point. At around 10am this morning Burberry shares had lifted to 2,084p, down more than 7.4%.
Marco Gobbetti has overseen a substantial rise in Burberry’s share price in the last five years, pushing Burberry deeper into Asia while also attempting to sharpen up the brand's ‘premium’ position.
Retail analyst Rahul Sharma told Capital that, in all likelihood, Gobbetti does want to go back to Italy, despite running a much smaller brand. "Ferragamo has issues - it has been left behind, relatively. If anything the top tier – Vuitton, Dior, Chanel, Hermes – have dramatically outperformed everyone else in luxury, and even Burberry looks poor in context."
Sharma says the business is still in better shape than "in the [Christopher] Bailey years [ex Burberry CEO] and it’s hard to deliver the sort of numbers that Louis Vuitton, etc, deliver given the still large mix of apparel it [Burberry] has. My guess is Gobbetti has personal reasons. Ferragamo is further behind and he can add more value to where that brand is right now."
Burberry says the search for a successor will now start though Gobbetti stays with Burberry until the end of the calendar year. "With Burberry re-energised and firmly set on a path to strong growth, I feel that now is the right time for me to step down,” said Gobbetti in a statement.
Digital and physical pressure
Gobbetti has done time at Céline and Moschino so is steeped in the luxury goods sector but integrating the physical and the digital sides of the business has been a challenge for the luxury sector.
This includes a number of issues with cross-national pricing. E-commerce makes it easy to identify how goods are charged across very different markets. Part of the bigger issue is structural for fashion. You can wear a luxury watch every day. That's not so easy with a dress or suit.