Yesterday, Burberry (LSE:BRBY) announced a new CEO. Burberry shares rallied 2.3% on the news and are now up almost 20% over the past year. It’s been anything but plain sailing over the past year trying to navigate the pandemic. Yet even with stores now back open and the unveiling of the new CEO, I’m still not convinced to buy the shares. Here’s why.
A change at the top
The new CEO is Jonathan Akeroyd. He comes from another fashion house, Versace. The experience he has is undoubted, with Akeroyd having navigated stormy weather before. For example, he ran Alexander McQueen for over a decade, during which time he had to deal with the death of the founder.
Yet the timings of the move are of concern to me. The current CEO, Marco Gobbetti, is off to a competitor and announced his decision to step down back in June. He’s going to stay on board until the end of this year, with the new CEO taking the reins in April.
In my opinion, as soon as Marco Gobbetti made the announcement, he had likely mentally checked out of the current role. So Burberry will have had a CEO for six months (at the end of this year) that may not have been 100% on the money during this period. It’ll then have three months without a permanent CEO at the wheel before Akeroyd arrives in April.
My worry for Burberry shares in this period is that the company could really lack direction. Fashion is a fast-moving industry, and I’m not sure that this changeover will allow the business to keep up with the times. As soon as investors start to share the same sentiment as me, the share price could take a tumble lower.
Uncertain about the future of Burberry shares
Clearly, this is just my opinion. Investors may not share this view. One reason for this could be optimism around the financial results. The latest update was back in July, for fiscal Q1. It showed retail revenue jumping by 86% versus the same period last year. Digital full-price sales more than doubled over this period as well.
This is clearly positive for the brand. However, I would note that this was released only shortly after the CEO announcement. Since then we haven’t had new information. The next update is due on 11 November.
So I’m sceptical that the momentum the business has will be able to carry over to next April. Even after the new CEO starts, it’s going to take a while for him to get comfortable and push the firm in a particular direction.
The argument against this point would be that the CEO is just one person. The chairman, designers, salesforce and marketing specialists also have huge importance when trying to push the brand forward. And the firm also has a clear strategy that it’s been pursuing for some time.
On balance though, I won’t be investing in Burberry shares at the moment. I can’t see myself looking to invest until well into next year, once I’ve got a feel for what the new CEO is doing with the business.
