Mark Kleinman: Is troubled Burberry heading for a chequered flag?
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly Morning Wire column. Today, he looks at Burberry’s threads wearing thin, Hammerson’s big Bicester sale and Love Island
Is troubled Burberry heading for a chequered flag?
Not only a chequered recent past, but on current evidence every prospect of a chequered future, too. Burberry, once a pioneering global luxury brand, has been in the doldrums for years – but its latest leadership transition, ousting Jonathan Akeroyd last week after less than three years in the chief executive’s seat, shows that this is a company now in full-blown crisis mode.
Its denials in recent months that it was interviewing potential successors to Akeroyd illustrate the sheer level of panic in the Burberry boardroom. The recruitment of Joshua Schulman, the former Coach and Jimmy Choo chief, does at least illustrate the point that Burberry retains serious executive pulling power.
It must, however, raise questions about the tenure of Gerry Murphy, its chairman since 2018. Murphy, who also chairs Tesco, was responsible for Akeroyd’s appointment, and must therefore carry the can for his failure.
A short-term search for the next chair is inevitable: indeed, as I reported on Sky News yesterday, I am told that headhunters (understood to be either Egon Zehnder or Russell Reynolds) are already engaged in seeking non-executive directors capable of making the transition to the top board role.
Burberry faces two immediate risks: an opportunistic bid approach, although it denied market rumours that it had been approached by Richemont, Cartier’s parent company.
The other is the appearance of an activist investor, which might actually be welcomed by other, long-suffering shareholders
One shareholder lamented to me this week that Burberry is in danger of becoming another unloved UK stock with which investors become so disillusioned that it will eventually be taken over and removed from the London stock market purely by dint of a suitor offering a 30 per cent premium to the current depressed share price.
“That would be another disaster for London,” the shareholder said.
Whether or not you share that view, Schulman should conduct a swift strategic review, overhaul Burberry’s creative team and set out an urgent plan to restore investor confidence. The alternative is that a London-listed, independent Burberry will soon face not only a chequered future, but the chequered flag as well.
Hammerson chief is (shopping) centre of attention
Credit where it’s due. The Hammerson that Rita-Rose Gagne inherited in 2020 was little short of a shambles. A brush with Eliott Advisers, the activist investor, resulted in a messy compromise which left most investors in the shopping centre-owner nonplussed.
Since Gagne replaced David Atkins at the helm, the company has adopted a common sense approach to asset rationalisation, selling stakes in non-core assets and joint ventures to raise capital.
This week’s confirmation that it had agreed a deal to sell its interest in Value Retail, the owner of Bicester Village, to funds managed by the private equity firm L Catterton, was the most significant move under Gagne’s leadership to date.
She described it as “a game-changer”, and for once this was not mere CEO hyperbole. The £600m in cash proceeds which Hammerson receives from the deal will be split between balance sheet deleveraging, reinvestment in its higher-quality assets and a £140m capital return to shareholders.
Many Hammerson investors are long-suffering, to say the least, ploughing £550m into the Brent Cross shopping centre owner in a 2020 rights issue.
The pandemic saw a significant number of its retail tenants demanding rent repricing – or simply going bust altogether.
Gagne and Rob Noel, the former Land Securities chief who became Hammerson chairman, have injected a commonsense approach, but it’s now time to take a more front-footed approach. Retail property valuations are on a – tentative – upward curve, as shown by recent transactions in the sector.
I suspect Gagne won’t be at Hammerson for more than another three years or so. She should take advantage of investors’ justified confidence in her leadership and look for a transformational deal that might benefit Hammerson shareholders while asset prices are still recovering.
A match made in heaven? NatWest retail offer adrift off Love Island
For Love Island aficionados, dates don’t come much bigger than July 29, and this year’s live grand final. But for a quirk of history – and Rishi Sunak’s utterly ignominious decision to hold a general election this month – the occupants of 11 Downing Street might have been keeping an unusually close eye on proceedings in the ITV entertainment series.
That’s because I understand that the government was close to agreeing a deal to sponsor Love Island as part of efforts to promote its planned retail offering of shares in NatWest Group.
Fronted by Sir Trevor McDonald, an ad campaign would have targeted younger consumers, particularly from minority ethnic backgrounds, whose responsiveness during market research was disproportionately enthusiastic.
Whether the use of public money to sponsor Love Island would have been universally well-received is debatable, but the point is now academic; Rachel Reeves’ Treasury seems singularly uninterested in pursuing a retail offer of NatWest shares.
Last week, the taxpayer’s stake in the bank fell below 20 per cent for the first time since 2008, and the pace at which it has been reduced over the last 12 months suggests NatWest might be fully back in private ownership by the time Reeves delivers her second Budget as chancellor – even without Sid having to be told.