Burberry COO to depart amid changing luxury scene

Dive Brief:

Burberry announced Friday that COO John Smith will depart the company and its board by sometime next summer after seven years with the company.
Smith said in a statement that he would be leaving for a “new challenge” and that he is “exploring a number of exciting new leadership opportunities” in international business.
The announcement is seen as another challenge for CEO Christopher Bailey, who is also the company’s chief creative officer.

Dive Insight:

Analysts, including Paul Thomas at Retail Remedy, have called for Burberry to appoint a more experienced executive to assist Bailey as the retailer struggles with a challenging luxury retail environment, according to Bloomberg. But the departure of Smith could further complicate Burberry’s efforts to come back.

“John Smith retiring opens the opportunity for further changes in senior responsibilities,” said Luca Solca, an analyst at Exane BNP Paribas, according to Bloomberg. “Burberry needs to go through management adjustments, as the organization based on Christopher Bailey having a dual role does not seem ideal—and results are under pressure.”

Last month Bailey took pains to describe Burberry as struggling under “macroeconomic” pressures—true for retail in general, arguably—like the strong dollar and ebbing growth in China, over which any individual retailer has very little control.

But Burberry also has certain operational realities —like the fact that many of its sales in the U.S. are dependent on department stores, which are suffering these days. In fiscal 2015, 35% of its North American revenue came from wholesalers, compared with 26% globally. The retailer also has the most stores in China among luxury brands, according to the Wall Street Journal.

Under Bailey and his team, Burberry is working to make corrections, including cutting back on wholesale deals with department stores like Nordstrom and Macy’s to trim bloated inventories that invite discounts. But that means shifting away from a major source of sales. Bailey has also said the retailer will consolidate its sub-brands and streamline its organizational structure, though he has not yet given many details.

The company is determined to draw a third of its growth from e-commerce, something of a departure for luxury retail, which has lagged behind mass market e-commerce in favor of in-store personalization and department store sales.