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It's all change at Burberry following poor sales figures

The latest figures from Burberry are uninspiring to say the least, but with management changes on the horizon the market is hopeful.
July 14, 2016

At the time of the luxury retailer's annual results in May, rumours went into overdrive regarding Burberry's (BRBY) management structure. Christopher Bailey has acted as the group's joint chief executive and creative head - two roles that are traditionally kept separate in this kind of business - since Angela Ahrendts left the group back in 2014 for tech giant Apple (US:AAPL).

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But the new arrangement hasn't seemed to work nearly as well as Mr Bailey and Ms Ahrendts did as a team. First-quarter retail sales of £423m were flat on an underlying, constant currency basis, while like-for-like retail sales dipped 3 per cent - although that was ahead of analysts' expectations. The group suffered a low single digit percentage decline across all markets, with specifically weak trading patterns in Hong Kong and continental Europe. However, the strengthening of global currencies against the group's reporting currency, sterling, should work to Burberry's advantage this year. Bosses reckon adjusted profit across the retail and wholesale divisions could enjoy a combined £90m boost come the end of March 2017.

Given the ongoing trading slump, the Burberry board has asked Mr Bailey to step aside, and make way for luxury goods veteran Marco Gobbetti to take over as chief executive in 2017, in turn leaving the same position Mr Gobbetti currently holds at French luxury house Céline.

Mr Gobbetti comes highly recommended and with 20 years of experience in the luxury retail industry. Along with Phoebe Philo - the creative force behind Céline's covetable designs - Mr Gobbetti grew net sales at the Parisian label by 62.9 per cent between 2010 and 2012. According to the latest annual report from parent group LVMH, Céline continues to grow strongly and contributes substantially to the wider group's profitability.

In fairness, Burberry is going through quite a thorough management reshuffle as current chief financial officer Carol Fairweather is also set to leave the group to pursue "new opportunities". Ms Fairweather will be replaced by Julie Brown who has been acting as interim chief financial officer at pharma giant AstraZeneca (AZN).