Burberry's new boss doesn't wear plaid

Angela Ahrendts grew up in a small town in Indiana wanting to be a designer. Now she's running the quintessentially British fashion house. Can she supercharge the brand whose ubiquitous check has lost its cachet?

By Peter Gumbel, Fortune

(Fortune Magazine) -- It's the first day of fashion week in Milan, and at the neo-classical Palazzo Serbelloni, Burberry is about to show its 2008 collection. Backstage, designer Christopher Bailey is overseeing the models as they prepare to strut down the runway in a succession of outfits with a mock military look, including outsized Celtic warrior motifs on buttons and belts. This is his big day.

But out front, Angela Ahrendts is already showing off some of the collection - on herself. She has been Burberry's chief executive since July 2006, and tonight she has dressed for the part in a black pantsuit, white blouse, and big black "luxury warrior" bag.

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Angela Ahrendts on the roof of Burberry's office in the British capital
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A recent $2,000 Burberry handbag
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On the runway in Milan in September, Burberry shows off its latest look.
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"Look at the jewelry," she coos, holding up her right wrist to show off a heavy black bangle. "Everything I'm wearing is from the new collection, even the undershirt."

She works her way through the crowd, blowing air kisses, shaking hands, and throwing out compliments. "You're doing such a great job," she tells the manager of Burberry's Rome store. "Isn't Christopher just amazing?" she gushes to an Italian journalist.

Then she spies Massimo Guidi, whom she hired three months ago to run Burberry's shoe business. The tone turns more serious. "Let's get together after the show. Let's talk. Let's understand the issues," she says, before moving on to embrace fashion photographer Mario Testino.

Ahrendts, 47, is in her element. Fashion has been her passion since she devoured glossy magazines as a teenager growing up in New Palestine, Ind., three decades ago. She thought then that she might become a designer.

Instead she took the corporate route, championing, cajoling, and cooperating with designers at a succession of apparel companies where she worked before joining Burberry (Charts) - Warnaco (Charts), Donna Karan, Henri Bendel, and most recently Liz Claiborne (Charts, Fortune 500), where she spent seven years honing her merchandising skills and overseeing hip young brands, including Lucky Jeans and Juicy Couture.

Gela Nash-Taylor, who founded Juicy with her friend Pamela Skaist-Levy, recalls how Ahrendts early on identified the company as a potential winner and then, after persuading Liz Claiborne to acquire it, helped build it into a $500 million brand. "

We were baby mogulettes who knew nothing about companies," Nash-Taylor says. "She took us by the hand and helped us get through the corporate maze. Pam and I have been through a lot of people. Angela is the best there is."

Donna Karan and others who have worked with her say one of her strengths is an ability to combine creative flair with hard-nosed commercial sense.

"Angela is a true partner in crime - she balances the design and the business side so well," Karan says. Ahrendts herself uses neurological terms. "I learned my left-brain skills from [Warnaco ex-CEO] Linda Wachner and my right-brain skills from Donna Karan," she says. "All Linda cared about were the numbers. All Donna cared about was the design."

Using both halves of her brain is critical as Ahrendts tackles the key issue facing Burberry: how to supercharge the firm's growth when the world economy suddenly looks a lot less buoyant.

The British company, founded by draper's apprentice Thomas Burberry in 1856, underwent a stunning transformation in the late 1990s under the leadership of another American, Rose Marie Bravo. A former president of Saks Fifth Avenue (Charts), Bravo turned a tired raincoat maker into a trendy fashion house, in part by exploiting the red, camel, black, and white check pattern that is Burberry's hallmark. Bravo took the company public in 2002, and sales have since jumped by 40%, to $1.7 billion last year.

The stock has more than doubled, easily outperforming the London market. But sustaining the pace has proved increasingly challenging. Growth flattened in 2005 and 2006, in part because of the waning popularity of its overused plaid.

Ahrendts's mission is to inject new life into the brand, expand its geographical reach, broaden its product range, and bring new efficiencies to everything it does. She sees an opportunity to turn Burberry into a global luxury powerhouse by building on its image and history.

"Our goal is not to be Hermés (Charts) or Bottega Veneta," she says, sitting in her bright white office in London's Haymarket, a stone's throw from Piccadilly Circus. "Britishness is so much a part of what we are about - now let's do that better than anyone in the world."

To succeed, a lot will depend on whether the past decade's torrid worldwide demand for pricey bags and other luxury goods will continue, on how competently and swiftly she can build on Bravo's legacy even as she tweaks it, and on designer Bailey, a fellow Donna Karan alumnus. The two are working together to overhaul Burberry's product line and bolster its nonapparel offerings. The old plaid hasn't disappeared altogether, but it's being superseded by other motifs, including a jousting knight on horseback.

The jury is still out. In her first year at Burberry, Ahrendts has pushed to open new stores much faster, including in the U.S., where she thinks the brand is underrepresented, and she's started to tackle production and supply-chain bottlenecks: On her second day on the job she ordered all divisions to cut the number of items they produced by 30%.

She's winning plaudits from some investors, including Morgan Stanley luxury goods analyst Claire Kent, who last month issued two upbeat reports on Burberry that talked about how the company's outlook has improved since Ahrendts's arrival.

But she got some bad press in Britain last year when Burberry announced it was closing a shirt factory in Wales and moving production to China. The move sparked protests by employees and was opposed by Prince Charles, actress Emma Thompson, and others who questioned how the firm could maintain its British identity if it gave up manufacturing there. (Burberry still makes trench coats in Britain.)

Ahrendts also needs to figure out Burberry's future in Japan, its single biggest market, which accounts for about one-third of sales. Its business there, unusual for a firm aspiring to be a global luxury brand, is licensed rather than owned, and as a result a number of the products on sale are different. As for the new look, Bailey's Milan show wasn't universally well received. Fashion maven Suzy Menkes fretted that the brand risked losing "that English sense of irony."

Ask Ahrendts to point to her biggest success at Burberry, and she tells the story of the anniversary handbags. Soon after she joined the company, she toured several stores and realized Burberry was missing out on the luxury-handbag boom.

"I wasn't smitten by the assortment," she says. "Everyone else was having stellar growth with their bags, and we weren't."

Bailey had already started working with designs that used icons drawn from the company archives, including the jousting knight. Ahrendts fast-forwarded the project and in just 60 days launched the new $2,000 bags worldwide last September as part of the company's 150th anniversary. Sales exploded. The launch month was the firm's best in two years, and the new line now accounts for up to 40% of handbag sales at Burberry stores. The company's overall sales growth has trended up more strongly since.

"Rose Marie Bravo is a hard act to follow," says Burberry chairman John Peace. "But Angela's track record has been phenomenal."

Fashion is a business in which everyone is routinely described as "passionate," "visionary," and of course "beautiful." But when friends and former colleagues talk about Ahrendts, they often refer to her small-town roots in the Midwest.

"'Angela,' I tell her, 'this is a long way from New Palestine,'" says Paul Charron, the former CEO of Liz Claiborne, who hired and promoted her. "When she tells me about meeting with Prince Charles, I start to laugh because I know how humble she is." (Despite incurring Prince Charles's displeasure over the factory closure, Ahrendts has been invited to Buckingham Palace four times since becoming CEO. "My husband says I should ask for the keys next time," she jokes.)

Glenn McMahon, CEO of St. John Knits International, who worked for her at both Donna Karan and Liz Claiborne, concurs. "She's very genuine and grounded, a salt-of-the-earth type, not one of those ego-fashionistas."

In New Palestine, where her mother was a model and she was the third of five children, she's remembered as a potential star. She sported a Farrah Fawcett hairdo for her yearbook and, says one of her teachers, Marvin Shepler: "She stood out. You knew she was going to be successful whatever she ended up doing."

She didn't stick around. As soon as she graduated from Ball State University in Muncie, Ind., in 1981, she took a plane to New York City and ended up working in sales for a small men's wear firm. Soon she was at Warnaco as a sales manager for Geoffrey Beene sportswear. In 1989, when one of her managers moved over to Donna Karan, she followed. Working with Karan was a great school, she says. Her biggest lesson: "Great design alone isn't going to yield the results investors are expecting."

Bravo got her first glimpse of Ahrendts in action back then. At the time, she headed the West Coast retailer I. Magnin and was frustrated with Donna Karan, which was growing faster than it could manage and able to deliver only about 70% to 80% of the orders it booked. Ahrendts quickly attacked the inefficiencies of the production and distribution system, and reckons she moved the number up to about 95%.

"I saw the changes," Bravo says. "We started to get deliveries on time."

Karan has other memories: Ahrendts almost gave birth to her first child in the office while preparing a 1995 collection. The company was working feverishly to fit Demi Moore for an ad campaign. The going was slow, and a very pregnant Ahrendts worked late into the night, even as her hands and feet started to swell. Her son was born the day after she finished.

"Her dedication and passion are unsurpassed," Karan says. "She eats, drinks, and sleeps it."

Ahrendts says she tries to balance her work and family life. At Burberry that means sometimes rising at 4 A.M. to work before getting her three children ready for school. Moving to London was a tough call, she says, not least because it meant her husband of 30 years had to give up his New York general contractor's business.

Her big setback came at Henri Bendel, the upscale women's brand owned by the Limited. CEO Leslie Wexner persuaded Ahrendts to leave Donna Karan and join the company to help roll out 50 Bendel stores around the U.S. "Part of me is very entrepreneurial," she says. "I loved the challenge of doing that with the support of a big corporation behind me." It was a short-lived experiment: After 18 months, the board pulled the plug on the project. Ahrendts describes it as "the most devastating blow in my career."

She quickly bounced back at Liz Claiborne, where Charron hired her. He was in an acquisitive mood, and she helped him find the companies to buy, starting with Lucky Jeans in 1999. Convincing him wasn't always easy. Charron remembers when she first came to him with the idea of buying Juicy Couture and showed him pictures of its very L.A.-style casual wear.

"I thought it was a little crazy. I said, 'Angela, it's a damn track suit.'" He skeptically went to meet the two founders and says that "after a couple of hours, I was as enamored of them as Angela was." Today Juicy Couture is one of Claiborne's hottest brands.

Ahrendts became one of the two top operational managers at Claiborne under Charron and might even have been a contender for his job. But the Burberry headhunter called first. Bravo says she and Peace had been looking for a strong candidate for months, and Ahrendts's broad experience with brands and merchandising was a big attraction.

"We wanted someone with a lot of apparel experience," Bravo says. "After all, we're a raincoat company." The two hit it off, even though they have quite different styles: Bravo is a mile-a-minute New Yorker, while Ahrendts is more organized and structured. "We're able to be light about our differences," Bravo says. "I felt we had shared values."

One of Ahrendts's early goals was to break down fiefdoms at Burberry. She created a new job, global head of supply chain, to oversee all of the company's production and is roping in the finance team much earlier.

"She's much more collaborative than other CEOs I have worked for," says chief financial officer Stacey Cartwright. "She likes to gather the team around her. She's energized by the debate." Designer Bailey is happy too, and not just because he'll be moving into a big penthouse space when the company relocates to offices near Victoria Station next year.

"She sees things as a consumer," he says. "That's one of her strengths." Some 6,000 miles away in California, Nash-Taylor at Juicy Couture watches with envy. "With Christopher, it's a lovefest in every sense," she says. "Angela knows to let him be the genius. She also knows where to move the brand. She's having the time of her life."  Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.