Apple Inc. (AAPL:US) hired Burberry Group Plc (BRBY) Chief Executive Officer Angela Ahrendts as head of retail operations, ending a yearlong search and adding the first woman to its 10-member executive team.
Ahrendts, 53, will oversee more than 400 retail outlets and Apple’s online store, the Cupertino, California-based company said today. Apple is tapping an executive who more than doubled Burberry’s sales since 2006, rejuvenating the brand by expanding in China, as well as embracing the Web and social media.
At Apple stores, started by co-founder Steve Jobs in 2001, hundreds of millions of visitors a year test the latest iPhones and iPads, giving it an advantage over Google Inc. (GOOG:US), Samsung Electronics Co. (005930) and Microsoft Corp. (MSFT:US) Ahrendts’s tenure at Burberry will be useful for Apple, which is facing the challenge of growing outside the U.S. and maintaining its high-end appeal as products become more mainstream.
“With iPhones being in more and more households, their brand is more of a mass-market brand than it has ever been and they can’t risk losing the aspirational aspect,” said Carolina Milanesi, an analyst at Gartner Inc.
Ahrendts will join Apple in the spring of 2014, reporting to CEO Tim Cook. Apple, the world’s most valuable company, has been without a full-time retail chief since last October, when former retail head John Browett was ousted by Cook as part of a broader management shakeup.
In almost eight years at London-based Burberry, Ahrendts extended a transformation started by her predecessor, Rose Marie Bravo, luring back higher-end customers who had been turned away as its products became more commonplace. She embraced technology by streaming fashion shows live on the Web, allowing customers to order items online during the events. The shares have gained in excess of threefold during her tenure.
“Ahrendts has always been incredibly focused on the digital side of the business,” said John Guy, an analyst at Berenberg bank in London. “If she was going to go anywhere from Burberry, it would be to that area.”
Ahrendts, who previously worked as executive vice president at New York-based Liz Claiborne Inc. and president of Donna Karan International, joins Apple as it attempts to drive growth by adding new customers outside the U.S. Under Ahrendts, Burberry became one of the most successful luxury retailers in China, a critical country for Apple after profit growth has stalled, according to Milanesi.
“She knows how to do retail in China and what works there,” Milanesi said.
Ahrendts will be the 10th member of Apple’s executive team, joining the likes of design guru Jonathan Ive and marketing head Phil Schiller. J Crew Group Inc. CEO Mickey Drexler is on Apple’s board.
Ahrendts’s compensation for the year ending March 31 was valued at 3.26 million pounds ($5.2 million), according to Burberry’s annual report. Apple executives dominate the list of highest paid U.S. executives.
Christopher Bailey, who for the past six years has been chief creative officer at Burberry, the largest British luxury-goods producer, will replace Ahrendts as CEO.
Burberry fell 7.6 percent, the biggest decline since September 2012, to 1,464 pence at the close in London. Apple rose less than 1 percent to $498.68 at the close in New York, leaving the shares down 6.3 percent this year.
Apple’s stores earn more than high-end retail outlets like Tiffany & Co. (TIF:US) and give the company a way to promote and teach customers about its products. The company generated $4.1 billion in revenue from its retail stores in the third quarter, with 84 million shoppers visiting its outlets.
Its first head of retail was Ron Johnson, who left in 2011 to become CEO of JC Penney Co. (JCP:US), a job he was later fired from after disappointing sales.
“She is a terrific choice,” Johnson said in a statement. “She is a creative and talented leader who will add value throughout the company in addition to the retail efforts. She will be exceptionally well received by the retail employees.”
Ahrendts’s experience overseeing a luxury brand is especially important for Apple, said Benedict Evans, an analyst with Enders Analysis in London. By contrast, Browett came from a retail background more focused on cost savings that didn’t mesh with Apple, he said. Cook had been overseeing the company’s stores in the absence of a full-time executive.
“Apple stores are a self-funding marketing operation,” Evans said. “She’s about delivering a great experience, with the right economics.”
Ahrendts has long championed the integration of technology and fashion. Burberry streamed a fashion show globally live last month using Apple’s new iPhone 5s. She helped push Burberry to team up with Twitter Inc. to stay on the cusp of technology by posting backstage photos of a runway show on the social-networking service.
“You’re going to see relationships with technology across anything that’s brand,” Ahrendts told Bloomberg Television last month. “I don’t care if that’s in home or what you wear. I just think it’s a new fact of life.”
As technological differences between smartphones become less apparent to most customers, Apple’s marketing and retail experience gives it an advantage over competitors, said Richard Windsor, an independent analyst with Radio Free Mobile.
“This is yet another move to strengthen the brand and retail experience,” he said. “The technological edge seems to be stabilizing and now Apple looks to be trying to differentiate through its brand and the experience the consumer enjoys when he or she walks through the door.”
This isn’t Apple’s first hire this year of a CEO of a luxury clothing company. In July, Apple hired Paul Deneve, the former CEO of luxury fashion house Yves St Laurent Group, to work on special projects for Cook.
The addition of fashion-house expertise comes as Apple is developing a wristwatch-like computing device, people familiar with the work have said.
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