Apple hires Burberry CEO to head its retail division
SAN FRANCISCO — Apple Inc. has hired Burberry Chief Executive Angela Ahrendts to run its retail division, hoping her background melding technology, fashion and commerce will be the right mix to navigate the future of the stores that have been a cornerstone of its success.
Although not a household name in the U.S., Ahrendts is a superstar in Britain because she led a turnaround of the revered but aging retail chain. The Midwestern native was the highest-paid CEO in Britain, where her leadership and tech savvy combined with her status as a rare female running a public company have drawn comparisons to Facebook Inc. Chief Operating Officer Sheryl Sandberg and Yahoo Inc. CEO Marissa Mayer.
Ahrendts “was able to take what was an iconic but stale brand and transform it back into a coveted, youth-centric fashion brand,” said Marshal Cohen, an analyst at NPD Group Inc. “Before it becomes stagnant, Apple is looking to inject some new and exciting methods to keep the brand engaged with that ever-fickle younger generation.”
Ahrendts will need that experience and confidence to hold her own as she becomes the lone woman among the top 10 senior executives at Apple. The company and its investors will be looking to Ahrendts to oversee Apple’s online commerce as well as its stores.
When Apple opened its first store more than a decade ago, it bucked the conventional wisdom that said the days of bricks-and-mortar retailing were over. Apple created stores with eye-catching designs where people could put their hands for the first time on revolutionary new products such as the iPhone and the iPad.
They became more than just stores, though. They became shrine-like destinations for Apple’s growing legion of fans to congregate and experience the products with others. The stores offered powerful communal experiences, such as thousands of people lining up every year for the launch of new iPhones.
But there have also been signs lately that as the company’s overall growth has slowed, the stores have also been seeing their ability to drive sales soften.
In the most recent quarter, which ended in June, Apple reported that retail sales fell slightly from a year earlier. In the first nine months of fiscal year 2013, which ended Sept. 30, average revenue per store slipped to $39.3 million from $40.3 million a year earlier.
Meanwhile, Apple was engaged in a prolonged hunt to find a new chief to oversee its retail strategy and operations. Ron Johnson, the architect of Apple’s retail strategy, had left in 2011. His replacement, John Browett, lasted only a few months before being fired in October 2012.
In an e-mail to employees obtained by the tech blog 9to5mac.com, Apple CEO Tim Cook said the search took so long because he wanted the new retail executive to run both the physical and online stores. Apple operates 415 stores in 13 countries.
“I have wanted one person to lead both of these teams for some time because I believe it will better serve our customers, but I had never met anyone whom I felt confident could lead both until I met Angela,” Cook wrote. “We met for the first time last January, and I knew in that meeting that I wanted her to join Apple.”
Ahrendts’ official position will be senior vice president of retail and online stores. Analysts said that although Apple stores remain immensely popular, her biggest challenge will be keeping the experience they offer fresh.
“The Apple stores’ metrics are absolutely off the charts in terms of productivity and customer visits versus essentially every other retailer on the planet,” said Toni Sacconaghi of Bernstein Research. “I think the key questions going forward are the pace of store rollouts, where the geographical focus will be, and whether alternative store formats might be considered.”
On that last item, several analysts said they think one possible change is a shift in focus from sales to services, such as its Genius Bar. The store Apple recently opened at the Stanford Center shopping mall, which is eight times larger than the one it replaced, is an example of how this might look.
The new store sports a “pavilion” design, with a front room dedicated to product displays. In the second half of the store, long wooden tables and stools offer places for workshops or deeper interactions with Apple staff.
Stephen Baker, NPD’s vice president of industry analysis, said Apple stores may be making a broader transition toward being more focused on building the company’s brand and customer loyalty, rather than just sales.
“This points to a little bit different future for what Apple stores mean to Apple,” he said.
Delivering strong branding and retail experiences were among the achievements that helped make Ahrendts such a success at Burberry.
Born in Indiana, she had spent most of her career in the fashion industry when she was tapped to take over Burberry in 2006.
Burberry shares soared 268% during Ahrendts’ tenure, closing Monday in London at 15.85 pounds, or $25.32, a share. They had been trading at 4.30 pounds, or $6.87, a share when she arrived.
Revenue for the year that ended March 31 was $5.1 billion, up from $1.1 billion in fiscal 2005.
Cohen of NPD said Burberry had struggled to broaden its base beyond baby boomer consumers. But Ahrendts’ arrival brought new styles infused with colors and patterns, a more social media-friendly advertising strategy “and ultimately, more communication across a wider sector.”
In 2012, Ahrendts had a total pay package of $26 million. But she also embraced the public role of running an iconic company, appearing on TV and giving regular public talks, such as one titled “The Power of Human Energy” at TEDxHollywood in March.
“My talk today is about human energy and how it single-handedly has the power to unite and transform companies and communities,” Ahrendts said. “I believe we all take in and emit energy. Very few leaders talk about it and even fewer have mastered it. But when you find it, energy is like finding your passion.”
Apple said Ahrendts won’t join the company until sometime in the spring. But when she does land, she’ll need all that energy to oversee an ambitious expansion of Apple stores.
For fiscal year 2013, Apple had projected it would spend $600 million on its retail stores, including opening 27 new ones, with more than three-quarters of them outside the U.S.
The company is also renovating or relocating some older stores that have outgrown their locations. In the most recent earnings call with analysts last summer, Apple Chief Financial Officer Peter Oppenheimer said the company had relocated four stores in the quarter that ended in June. The company had expected to complete 23 relocations in fiscal year 2013.
Daniel Ladik, associate professor of marketing in the Stillman School of Business at Seton Hall University, said he expects Apple to continue expanding its stores in China. A rumored deal with China Mobile would dramatically expand the number of customers Apple could reach in that market.
To that end, Ahrendts is also a strong fit for Apple because she made Burberry a big brand in China and understands consumers there well.
“Burberry does spectacularly well in China,” he said. “Apple does not do spectacularly well in China, even though it’s the company’s second-largest market.”
Ahrendts’ hiring is also notable because Apple has been on a bit of a fashion streak in its hiring.
Two months ago, Apple hired Paul Deneve, former chief executive of Yves Saint Laurent, to be vice president in charge of special projects. Apple then hired Enrique Atienza, a senior vice president at Levi Strauss & Co., to run its U.S. retail operations, and Nike design director Ben Shaffer.
In a statement, Ahrendts said, “I have always admired the innovation and impact Apple products and services have on people’s lives and hope in some small way I can help contribute to the company’s continued success and leadership in changing the world.”
O’Brien reported from San Francisco and Hsu from Los Angeles.
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