Bloomberg News

Ahrendts Swaps Fashion for IPhones to Lead Apple Retail

October 16, 2013

Ahrendts Swaps Fashion for IPhones to Lead Apple’s Retail Effort

At Burberry, Ahrendts emulated the iPhone maker, using its website as a focus for sales and expanding the company’s own retail stores instead of relying on others to sell suits, handbags and trench coats. Photographer: Michele Tantussi/ Bloomberg

When Angela Ahrendts disclosed her departure from Burberry Group Plc (BRBY), she listed turning the clothing and accessories purveyor into a “digital luxury retailer” as among her accomplishments.

She drew accolades over her tenure for bringing back high-end customers, making London-based Burberry’s website a sales hub, expanding in China, streaming fashion shows online and working with social media.

Now as the 53-year-old shifts over to become Apple Inc. (AAPL:US)’s retail chief, she has a new task of a grander scale. Ahrendts takes over Apple’s vast retail operation, facing dual challenges of adjusting to a culture that’s often tough on outsiders and guiding a global expansion as the iPhone maker faces slowing growth.

“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’s hiring concludes a nearly yearlong job search, after Chief Executive Officer Tim Cook’s previous retail head, John Browett, left after less than a year. Ahrendts becomes the first woman and the 10th member on Apple’s executive team, joining the likes of design guru Jonathan Ive and marketing head Phil Schiller.

Following Apple

At Burberry, Ahrendts emulated the iPhone maker, using its website as a focus for sales and expanding the company’s own retail stores instead of relying on others to sell suits, handbags and trench coats. Burberry even sells an $850 spotted animal-print iPad case and recently aired a fashion show online using an iPhone 5s.

Apple is counting on her to expand in countries such as China and maintain the loyalty of customers as its products become more mainstream. The world’s most valuable company has seen sales and profit growth stall amid competition with rivals such as Samsung Electronics Co. (005930)

“She will ensure that as they continue to grow, they will maintain a personal touch with customers,” said Constance Klein, a fashion-industry recruiter with Scout Talent.

Klein, who previously was at Gucci Group NV with people who went on to work with Ahrendts, said she is quick to identify good ideas. When a member of Burberry’s team in Southeast Asia found success with a test of a new approach to e-commerce, Klein said Ahrendts quickly promoted him to head of digital commerce and had him overhaul the company’s website.

The Outsider

Ahrendts, who previously worked as executive vice president at New York-based Liz Claiborne Inc. and president of Donna Karan International, will join Apple in the spring of 2014, reporting to Cook. Some outsiders haven’t fared well on the company’s management team, with Browett ousted by the CEO as part of a management shakeup last year. Mark Papermaster, a former engineering executive from International Business Machines Corp., left in 2010 after less than two years.

George Blankenship, a former Apple vice president in charge of selecting new store locations, said Ahrendts has the experience to succeed where others haven’t.

“Apple is focused on maintaining its brand,” he said. “Clearly, Ahrendts has done that at Donna Karan, Liz Claiborne and most recently Burberry. She’s also been a CEO for an extended period of time. I think she could eventually be a candidate for CEO of Apple.”

A native of Indiana and the daughter of a former model, Ahrendts spent the past seven-plus years at Burberry extending 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 and embracing technology. The shares have gained in excess of threefold during her tenure.

Tech Savvy

“She’s a retailer who is tech savvy,” said Doug Ehrenkranz, an executive recruiter for retail companies at Boyden. “Apple will put Angela into a whole arena where her impact can be exponential versus Burberry.”

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. Shares of the iPhone maker have lost 6.3 percent so far this year.

Shopping Experience

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 yesterday about Ahrendts. “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.”

Luxury Experience

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.”

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 recruited 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.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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