Apple Hires Burberry CEO to Run Retail, Keep Brand Burnished

Apple on Tuesday tagged Burberry CEO Angela Ahrendts as the company's new head of retail and online stores, filling a spot in the executive top tier that's been vacant for nearly a year.

Apple

Apple on Tuesday tagged Burberry CEO Angela Ahrendts as the company's new head of retail and online stores, filling a spot in the executive top tier that's been vacant for nearly a year.

Angela Ahrendts, the CEO of U.K. fashion house Burberry, will take charge of all Apple retail, including its online store, in 2014, Apple announced Monday. (Image: Burberry.)

Ahrendts, 53, will lead a new unit overseeing both Apple's brick-and-mortar retail chain -- which as of June 30 included 408 stores worldwide -- and its e-store at www.apple.com. It will be the first time that all non-iTunes retail will be combined under one executive. Ahrendts will report directly to CEO Tim Cook and will be part of the company's leadership team. She will be the sole woman on the team.

In hindsight, Apple and Burberry last month offered a clue to her hiring when the latter used several then-new iPhone 5S smartphones to film its Spring/Summer 2014 fashion show in London. Apple did its part by issuing a press release to highlight Burberry's iPhone 5S use.

Analysts applauded the hire Tuesday.

"She has a great track record building a high-quality retail network around the world, and especially in markets Apple cares about and needs to be stronger in," said Benedict Evans, an independent analyst, in an email.

By all accounts, Ahrendts had a successful turn at Burberry, the U.K.-based luxury fashion house. Since taking the CEO chair in mid-2006, Ahrendts, along with creative director Christopher Bailey, led a turn-around of the 157-year-old company, which had suffered from brand over-exposure and a resulting tarnish in the last decades of the 20th century.

She was credited with driving Burberry's digital strategy, including major social media initiatives and unifying the look of the firm's online and physical stores. She also pushed Burberry into new markets -- including China -- and kicked off new income sources. Burberry's revenue in the first half of fiscal 2013 was up 8% to 2 billion ($3.2 billion).

By comparison, Apple retail stores generated $4.1 billion in 2013's second quarter alone.

Ahrendts, who has often credited Apple as a model for her Burberry vision, will be Apple's first head of retail in almost a year. In late October 2012, Cook shook up the executive ranks, ousting both Scott Forstall, who had been in charge of iOS development, and John Browett, the company's top retail executive.

Browett, hired by Cook the previous January but who didn't start working at Apple until April, raised eyebrows when he instituted a staffing-level change in the company's stores that not only was quickly reversed, but triggered a public apology from Apple. His hiring had been questioned by some because his previous job had been as CEO of Dixons Retail, one of Europe's largest electronics chains but one that had acquired a downscale reputation.

Today, however, analysts saw Ahrendts' hiring as exactly the opposite: As another signal that Apple was serious about retaining its premier brand image.

"I think Apple looked at Burberry and the challenges they had in the market, and saw her as the one who brought back that aspirational brand and then grew it in places like China, Korea and elsewhere," said Carolina Milanesi, an analyst with Gartner Research, in an interview. "Those speak to the challenges Apple is having. Like Burberry, Apple has to deal with the fact that its brand is everywhere because of the iPhone, but they cannot run the risk that the brand is seen as cheap."

"Burberry is very successful in China," pointed out Ben Thompson, an independent analyst based in Taiwan who covers technology at his Stratechery.com website, via instant message Tuesday. "[Her hire] is more about that she's clearly successful at driving brand value."

On Twitter, Evans noted that Burberry has 69 stores in China, compared to Apple's eight.

China is a focus at Apple, what with its huge number of mobile phone subscribers and the part it has played in generating record Apple profits over the last several years. But as even Cook has acknowledged, revenue from the region -- Apple defines its Greater China sales area as the People's Republic, Hong Kong and Taiwan -- was down 14% year-over-year in the second quarter. The region's contribution to Apple's total revenue also dropped for the quarter, from 15.4% in 2012 to 13.1% in 2013.

Thompson, who has gone on record as viewing Apple's pricing model for the iPhone 5C as a reaffirmation of the Cupertino, Calif., company's brand positioning rather than, as most expected, an attempt to go low and grab market share, said that Ahrendts' hiring was Apple again "doubling down on the iPhone's higher order differentiation."

On his website, Thompson elaborated. "One of the many bear arguments against Apple is that the basis of consumption in smartphones is changing from the user experience to price," Thompson wrote. "cfdcv ued design and user experience are sustainable differentiators, Apple seems to be driving the basis of consumption of their products to that of a lifestyle and statement of luxury, which companies like Burberry have done quite well and quite profitably."

Also notable, added Milanesi, was that Ahrendts will be in charge of both sides of Apple retail, the physical stores and the online outlet. "The two need to go hand-in-hand, the two have to be together," Milanesi said. "Apple must portray the brand in the same way in both."

Apple has not filed documents outlining Ahrendts' compensation with the U.S. Securities and Exchange Commission (SEC), but according to U.K. filings, she was paid a salary for the year ending March 31, 2013, of 1.02 million ($1.63 million) and a bonus of 1.55 million ($2.48 million).

Those numbers are significantly higher than similarly titled Apple executives, minus the large stock awards they are regularly granted. In fiscal year 2012, for example, the salaries and bonuses for other senior vice presidents, including CFO Peter Oppenheimer, technologies head Bob Mansfield and operations chief Jeff Williams, were $2.4 million each.

Cook's 2012 salary and bonus of $4.16 million was only slightly higher than Ahrendts' $4.11 million at Burberry.

It's unclear exactly when Ahrendts will join Apple. Although the company said "in the spring" in its press release, Burberry's corresponding release said she "will step down as Chief Executive Officer by mid-2014."

This article, Apple hires Burberry CEO to run retail, keep brand burnished, was originally published at Computerworld.com.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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This story, "Apple Hires Burberry CEO to Run Retail, Keep Brand Burnished" was originally published by Computerworld.

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