Is the Burberry share price set to soar after its new boss is revealed?

The Burberry plc (LON:BRBY) share price has been in the doldrums. Will news of a new CEO help turn the FTSE 100 (INDEXFTSE:UKX) stock around?

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After months of hand-wringing for investors, luxury label Burberry (LSE: BRBY) unveiled its new CEO — Jonathan Akeroyd — this morning. As a holder of the stock myself, I’m cautiously optimistic about the appointment and what it could mean for the Burberry share price in time. Here’s why.

Good fit

Thanks to the coronavirus crisis and the need to shut up much of its store estate around the world, the Burberry share price has been on something of a rollercoaster ride for holders. Just when investors thought it might be safe to come out from behind the sofa, the shock resignation of current boss Marco Gobbetti was announced in June. Since then, the stock has dropped almost 20% in value. 

The arrival of Akeroyd should give owners the stability they crave. Indeed, the Burberry share price is comfortably in positive territory today, suggesting that the market is generally receptive to the news. 

To be clear, the fit between Akeroyd and Burberry does look good, even if the number of suitable candidates to pick from for a job this elevated may have been rather limited. Before arriving at Milan-based fashion purveyor Gianni Versace in 2016, Akeroyd was CEO of Alexander McQueen for 12 years. His apparent enthusiasm to return to the UK also suggests the new leader intends to remain in the post for a good while.

Patience required

But let’s not get ahead of ourselves. Burberry’s new leader isn’t taking up the reins until next April. Gobbetti departs for Italian peer Salvatore Ferragamo in December with chairman Gerry Murphy taking charge over the interim period. 

Knowing this, I wouldn’t expect much in the way of detail on Akeroyd’s intended strategy until next Spring. That’s a good six months or so for the Burberry share price to potentially drift lower. This might be the case even if trading at the £7bn cap improves.

Of course, a share price fall could conceivably turn into a crash if wider-market concerns over supply chains or inflation intensify. A reintroduction of Covid-19 restrictions could also impact sentiment towards all stocks, particularly those that depend on discretionary spending.

As always, there’s no sure thing in investing. The only thing we can be sure of is that Akeroyd’s services aren’t coming cheap. A base salary of £1.1m and cash benefits of £50,000 is just the start. A potential bonus of £2.2m and £1.79m in share awards is also up for grabs. Let’s just say I’ll be looking for him to justify this remuneration from the off.

Quality stock

Having had a question mark hovering over the company for a number of months, I’m fairly reassured by today’s announcement. Notwithstanding this, I suspect it won’t be enough to help the Burberry share price recover to levels seen over the summer just yet.

No matter. As a Foolish investor, I know it’s vital to focus on where the company will be in years not months. This may include taking advantage of temporary share price dips such as the one Burberry has been experiencing. Management merry-go-round aside, I submit that this remains a classy, resilient company that should thrive again.

This is assuming, of course, it’s not taken out by a deep-pocketed suitor before long. Akeroyd’s got form here, having been at the helm when Versace was snapped up by Michael Kors (now Capri Holdings) back in 2018.

Whatever happens, it’s unlikely to be boring. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares in Burberry. The Motley Fool UK has recommended Burberry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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