Shares in luxury goods group Burberry (BRBY) were the biggest losers on the FTSE 100, falling 6.4% to £21.05 on the shock news Marco Gobbetti plans to step down as CEO and leave the company at the end of 2021.

Burberry shares have recovered from their pandemic-induced slump and rallied on the expectation the trenchcoats-to-cashmere scarves seller should prosper as a wealth of unleashed pent-up demand drives a massive boom in luxury goods spending.

Yet investors now face greater uncertainty as a new leader could alter the hitherto successful strategy pursued by well-regarded boss Gobbetti.

GOODBYE GOBBETTI

Burberry said Gobbetti, who has led the transformation of the brand and business, wants to take up another opportunity that will enable him to return to Italy and be closer to his family.

Gobbetti insisted it has been ‘an incredible privilege’ to serve as Burberry’s CEO. ‘As a group, we have elevated and strengthened the brand and the business, while continuing to be a force for good. With Burberry re-energised and firmly set on a path to strong growth, I feel that now is the right time for me to step down.’

Famed for its iconic Equestrian Knight Device and the Burberry Check, the luxury goods group will now begin the search for his successor.

Russ Mould, investment director at AJ Bell, said Burberry’s share price slide shows how much Gobbetti is ‘credited with the success of the luxury goods business. Share prices can rise when a CEO resigns if the market didn’t like the incumbent as it suggests optimism towards the company finding someone better to do the job.

‘Equally, share prices can fall when a CEO resigns if they are an integral part of the company’s success.’

POTENTIAL BID TARGET?

Neil Wilson, chief market analyst for Markets.com, warned Gobbetti’s departure ‘presents near-term risks - investors will want to know who takes over the reins and whether there is change in strategy.’

Wilson also pointed out that given the consolidation in the luxury sector, and its current valuation versus peers, Burberry could be a bid target.

‘Whilst there are some pandemic-related issues still being washed out, Burberry remains a strong brand in the luxury space with room to appeal to a broader consumer base over the coming years,’ commented Wilson.

Last month (13 May), Burberry reported an encouraging sales recovery during the year to March 2021 and reinstated the full year dividend at 2019 levels, although these positives were overshadowed by a warning that operating margins will be hit by increased investment and costs normalising in its new financial year.

READ MORE ON BURBERRY HERE

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Issue Date: 28 Jun 2021