Burberry’s new hire raises expectations and its stock

Burberry’s share price was bolstered on the announcement British designer Daniel Lee was appointed its new creative director. Shares rose 4.4 percent by midday trading on Wednesday.

Mr Lee, who steps into the role next Monday, will have the task of rejuvenating the heritage and quintessential Britishness that was sideswept under the tenure of outgoing designer Riccardo Tisci. Mr Tisci’s streetwear aesthetic failed to create the same hype in demand that brands like Bottega Veneta, Balenciaga and Saint Laurent emitted, despite a turnaround strategy that was working in other areas of the business, like driving full price sales growth.

Repeating Bottega Veneta's success

Mr Lee’s appointment is the first major shakeup since Jonathan Akeroyd took over the role of chief executive officer earlier this year. Burberry’s shareholders will be looking for a similar boost in accessory sales, hoping the magic touch Lee showed at Bottega, where he created some of the most popular hand bag icons that sent sales and brand value skyrocketing, to be repeated at Burberry.

Returning the British perspective to Burberry will be a key focus for the house, as is the continuation of steps implemented to elevate its luxury offer and be regarded as a bonafide luxury brand. A logo upgrade under Mr Tisci certainly brought new energy, but it in other areas the brand remained flat. Similarly, upping price points does not a luxury brand make.

When fashion houses chase hype it may positively impact sales in certain categories and seasons, but in the long run it is easy to lose touch with heritage and its authentic raison d’etre.

Burberry has other challenges, too, with the departure of Julie Brown, its chief financial and operating officer, for whom it is yet to find a successor. Burberry has also been relatively late buying and investing in its own vertical integration to secure its supply chain. Opportunities like the leather goods facility it now owns in Italy will be a focus in the short and medium term. With shoes and handbags key categories for growth, these would need solid investment to drive innovation and product prowess.

Elevation in progress

Many luxury consumers will recall the days when Burberry’s ubiquitous check was everywhere, including in discount and lower tier retailers and touted by reality stars. In the minds of these shoppers, it takes time to adjust to be seen as a true luxury player. In many markets there remains a perceived cachet difference in owning a Buberry handbag compared to Chanel or Bottega.