Best of British: Why Burberry has the fashion business all wrapped up

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It fought the fakers, weathered an image crisis and resisted recession to become the darling of the FTSE 100. On the eve of Burberry's return to London Fashion Week, Susannah Frankel checks out how a trenchcoat company became the British design phenomenon of the decade

Masterful forward planning, or happy coincidence? Harry Potter And The Half Blood Prince is the blockbuster film of the summer season and Burberry employs Emma Watson as the face of its autumn/winter advertising campaign, and, oh, opens its first ever childrenswear store in fashionable Westbourne Grove. Bad timing or canny opportunism? Late in 2008 the stock market crashes and worldwide recession takes hold just as Burberry seals a property deal and moves into new, seven-storey, refurbished headquarters, formerly a government building and next door to MI5, in Westminster.

Then, this week, Burberry enters the FTSE 100 just days before returning to London Fashion Week in a blaze of glory.

Of course, there's no such thing as coincidence. And if it seems like the spectacular revival of this, Britain's most famous status label, must be somehow blessed by the hand of some higher power, it should come as no great surprise that any reversal of the company's fortune is due to hard work, an ability to react at high speed to the prevailing economic climate, no small amount of creative talent and strategic foresight that, in this country at least, is unrivalled.

Today, Burberry boasts men's and women's collections for four clothing lines, a children's line, underwear, eyewear, watches, perfumes, accessories. It has 118 retail stores, 253 concessions and 84 franchise outlets in 25 countries. Burberry is currently capitalised at £2.1bn which dwarfs any other British clothing brand. By comparison Jaeger, which bought Aquascutum earlier this week, boasts an annual turnover of around £300m for the two names combined.

Visit Burberry's flagship store in Knightsbridge and, while the rest of the luxury goods community in that area appears to be in the doldrums, the place is buzzing with everyone from fashion followers looking for an early autumn fix to middle-aged couples from the provinces set to invest in that most respectable and respected of garments: the Burberry trench coat. And yes, there are the requisite Japanese and Americans in attendance too. Should they fail to find what they're looking for – it may have sold out – they can search online in store, with the guidance of shop assistants, and not long afterwards, it will arrive at their front door neatly packaged in the new, supremely-understated fawn-coloured packaging with its discreet old-gold logo.

Here is the new Buckingham trench, slightly more fitted and with extra D-rings for added value but available for exactly the same price as its more roomy predecessor which remains on display. There is the Burberry "snood" – a hybrid of the scarf and hood and designed in everything from rabbit fur to fine-gauge cashmere and, of course, the signature beige, black, white and red Burberry check. Classics and small accessories sit next to the more upscale Prorsum main line, alongside Burberry Brit, a more casual interpretation of the same heritage-infused theme, fragrance, candles, footwear, bags and more. Each aspect of the company's burgeoning produce is marketed in the windows, where Watson and her preternaturally good-looking, if always slightly dishevelled, cohorts lark about in the great outdoors, dressed head-to-toe in Burberry as captured by the lens of superstar photographer Mario Testino.

All of this and more is testimony to what Suzy Menkes, the respected fashion editor of International Herald Tribune, recently described as "an absolute identity to Burberry that should be the envy of every brand". The City is equally enamoured. The company's share price, which was valued at £7.20 in April 2007, troughed at £1.60 last November. Anyone who invested in Burberry at that point would be more than happy; shares are now worth just over £5.00, a recovery that, in the current climate, is not to be sniffed at.

"The management at Burberry is very alive to managing their cost base," says Katharine Wynne, retail analyst at Investec Securities, a South African investment bank. While the luxury goods industry is still reeling over the extreme drop in demand for product at the end of last year, Burberry wasted no time redirecting department store stock into its own retail outlets to avoid it gathering dust on the sale rails, she explains. "They've also seen that demand for big, expensive bags is reduced and have produced smaller ones at slightly lower price points very quickly. Burberry's other big advantage is that the pound is weak which helps enormously. If a garment is priced at £1,000 sterling against the dollar it's looking rather cheaper now than it did 18 months ago, against the euro it's looking very much cheaper. We've seen a big influx of overseas visitors to this country. And what are they looking to buy? Well, classic British merchandise that won't date."

Such merchandise is Burberry's core business but the company's greatest advantage is its reach, which stretches from the football terraces to the red carpet and on to the more so-called directional consumer who is now, equally, well and truly seduced by not only trench coats but also fine knitwear, hand-finished tailoring with a distinctly Anglophile and lived-in flavour, feminine-but-never-girlish dresses that are among the most copied on the high street, not to mention desirably extreme footwear. The company's Facebook page, meanwhile, has 600,000 fans – more than any other fashion/lifestyle brand. Maintaining this relatively democratic approach while ensuring Burberry doesn't suffer from overexposure is surely the company's creative director Christopher Bailey's great gift.

"Bailey came in and focused on the core business but he is now involved in every aspect of it," says Wynne. "The entire range has his handwriting all over it. For that past five years or so he's managed to push Burberry just ahead enough not to frighten the core customer while keep it interesting from the fashion perspective. Capture that man and shackle him to the business, because he's fantastic."

The fantastic man in question is sitting in his equally fantastic new office on the top floor of the aforementioned premises looking forward to a full day of fittings in preparation for Burberry's first London Fashion Week show in more than a decade. The building is "cash neutral". The company sold its sprawling Haymarket headquarters at the height of the property boom and bought Horseferry House, as they call it, during the slump. Whatever, all at Burberry are suitably proud of their home which – with its light-filled atria, beige marble floors and fumed oak furniture – is nothing if not a reflection of the spirit of the Burberry name. For his part, Bailey, 38, who oversaw the entire refurbishment of the space, has recently returned from a holiday spent crabbing with his nephews in nowhere more exotic than Scotland. He is as apparently relaxed as the brand he presides over, fresh-faced despite claims that "I don't have a very good diet" and dressed, as always, in his own designs, specifically, a narrow grey wool jacket, black jeans, a white shirt, beige sweater and well-worn black shoes.

"I'm so excited about showing in London," he starts off – since Bailey arrived at the company in 2001, Prorsum, which means "forward" in Latin, has been shown on the Milan catwalks. "We're all so excited. It just felt right," he says, before dispelling rumours that the measure might be an exercise in cutting costs. "It's not remotely about that. It's actually costing us more to show here, which is annoying. Everything costs more in London: catering, tents, staff. Why are we doing it? We just built Horseferry House and it felt like the right moment to come home. It's British Fashion Week's 25th anniversary and, okay, we're in the middle of a recession, but London feels to me like it has this incredible energy right now."

As one of the global fashion industry's main players, its presence will attract big-name models, hair and make-up artists and, crucially, a more international audience lured not only by its designs but also considerable advertising budget. "I'm not sure it's permanent," Bailey continues. "Let's see how it goes, but I love the fact that we might make a difference. We have 900 people in this building [Burberry employs 6,000 worldwide] and it's wonderful for them to have the chance to work on a show here. We're doing a big party afterwards. We just want to celebrate being here."

Burberry has much to celebrate. "I never imagined we could have been a FTSE 100 company. I still think of us as this tiny little company. We're very tight, everybody knows each other. It's a very friendly, embracing company. And this is huge."

The parallels between Bailey – who worked as womenswear designer at both Gucci and Donna Karan before landing his current position – and Burberry are at least part of the secret of any success. He is an Englishman born and bred; his father was a carpenter and craftsmanship is in his blood. He has precisely the warm, honest and approachable character the brand ideally represents.

"I bought my first Burberry trench coat in the Eighties at a jumble sale in a local church hall in Yorkshire," Bailey told me not long after he joined the brand. "I used to buy vintage clothes every Friday. By the time my father got tired of me storing everything in his work shed and made me throw everything out, I probably had about 20 of them, for no other reason than the fact that I loved the style and history of Burberry. When I started working here, it was the perfect match."

In many ways, Bailey, with his no-nonsense approach to business and spectacular ability to diversify creatively, is the ultimate 21st-century designer. He says now: "I love my role because I can be working on a show now but then I'm simultaneously working on a fragrance, the bottle, the packaging, watch design, furniture, architectural projects. If you're the design director or the creative director of a company you can't think in a one-dimensional way. It's not just about the clothes, it's about how you communicate the clothes, the attitude of the clothes, the environment the clothes are going to sit in. How, for example, can you ignore the whole digital explosion that's happening?"

Not for Bailey either the elitist and at-times alienating tendencies of some of his peers in high fashion. Instead: "What I love about Burberry is the fact that it's not so exclusive it excludes half the population. I don't see a problem with something being mass. Of course, you need the aspirational side too, but I love the idea that at Burberry we have different lines, each with different personalities, different lifestyles, different budgets, different presentations."

The story begins with Thomas Burberry who, in 1856, at the age of 21, set up as an outfitter in Basingstoke. He was joined by his sons Thomas Newman and Arthur Michael Burberry in the late 1880s. In 1888 Burberry patented a method of processing yarn to ensure it was water repellent and so gabardine was born. Thomas Burberry built mills first in Basingstoke again and later in Farnworth, Lancashire. To cater to increased demand, a Burberry store opened in the Haymarket. In 1904 the Burberry crest featuring an equestrian knight in armour was designed and registered as a worldwide trademark. The famous trench coat, with its epaulettes, back vent, storm flaps and D rings, dates from the First World War and was developed by Burberry for the Royal Air Force and worn by Ernest Shackleton who crossed the Antarctic in one. (The recently-introduced "snood" was inspired by the hood of a Parka also worn by Shackleton, which gives some insight into how Bailey's mind works to reference heritage in innovative ways.) Since that time, everyone from Audrey Hepburn in Breakfast at Tiffany's to Humphrey Bogart in Casablanca and from Madonna circa her incarnation as British country aristo to the Queen has been captured in the great classic design. The equally iconic Burberry check came in 1924, lining winter weight overcoats. In 1920, Burberry became a Limited Liability Company with its ordinary and preference stock quoted on the London Stock Exchange. Burberry remained family-run until 1955 when Great Universal Stores Limited (GUS) took over until the company was de-merged in 2002.

It's only to be expected that Burberry's rise to supremacy has not been without occasional setbacks. By the mid-Seventies its name was primarily associated with tourists in search of a souvenir of unreconstructed Englishness. The label was soon appropriated, however, by a rather different customer, the dandified casual who, in a brilliant up yours to the class system, adopted Burberry, and the check in particular. It wasn't long, though, before over-licensing led to the check, in particular, flooding the market. In 1997, Rose Marie Bravo, the American-born former president of department store Saks, was appointed CEO and set about reining it in. It was Bravo who installed a named designer – the first was Roberto Menichetti – and introduced the Prorsum line, and employed Mario Testino to enhance the brand's image. The check remained overexposed, on everything from court shoes to baby buggies, until Bailey arrived and pulled it right back.

Even under this designer's tenure, the scale of the brand has led to difficulties. Most memorably, in 2004, two pubs in Leicester banned anyone wearing Burberry. "I don't know that that's something we need to dwell on," says Bailey. "Is it great press? No, it's not. But the point of Burberry is that it appeals across the classes. That's what it should be. I don't like it when people claim it is a reflection of hooliganism though."

Any undesirable check is likely to be the work of counterfeiters. "That is a massive problem," he continues. "And it's not just the financial aspects, it's the human aspects. When you see how these factories churning out counterfeits treat their employees, it's horrendous. Yes, it's damaging to the brand when someone goes home in something they think is Burberry and it brings them out in a rash, but you have to think of the human side too. We work with other big luxury brands to control it because it's destructive on every level."

In 2007, Burberry announced it was closing a polo shirt factory in Wales, losing 300 jobs. Bailey confirms today that: "All our classic trench coats are made in Castleford, our scarves come from a mill in Scotland and are made of incredible cashmere. Prorsum is made in Italy. Absolutely, we go to the Far East. There's a really derogatory attitude against made in China but it's like anywhere, there are great places and there are terrible places. I need to make this very clear: you have to be selective there as you do everywhere."

A little over three years ago now Angela Ahrendts, American-born and formerly executive vice president of Liz Claiborne and president of Donna Karan International, where she met Bailey, took over from Bravo as Burberry CEO. The pair have continued to expand a great British brand. Ahrendt will continue "to purify the message of the brand".

As embodied in the past by Kate Moss, Stella Tennant and now Emma Watson, that is, according to Bailey "the whole spirit and character of Englishness. What I'm interested in is this very relaxed person, sophisticated and very elegant but not too preened and perfect. Burberry is about heritage, but about making that heritage relevant for today. You have to make sure what you do is right for the moment you live in. What makes things relevant? Without wishing to sound flaky, it's a sensitivity to the spirit we live by today."

And with that, Bailey, who has just such sensitivity in spades, is off to begin his day's work.

Fabled label: Burberry's big moments

1856

The 21-year-old Thomas Burberry opens a small outfitter's shop in Basingstoke, Hampshire. It quickly becomes a success due to the quality and durability of its outerwear.

1891

Now trading as Thomas Burberry & Sons – and popular with anglers, explorers, military men and royalty – he opens a shop on Haymarket in London's West End, which will remain the company's HQ until the end of 2008.

1914

Burberry adds D rings and epaulettes to its officer's coat design in line with new combat requirements in the trenches and the "trench coat" is born. Ten years later the famous red, black and camel Burberry check is trademarked and used as a lining to the coats.

1955

The queen awards Burberry a Royal Warrant, a symbol of "quality, excellence and recognition". Prince Charles awards a second Royal Warrant in 1989.

1970

Burberry opens a flagship New York store and during the next two decades, the company expands throughout the US, opening stores in every major city and becoming a household name there.

1961

Audrey Hepburn wears a Burberry trench coat in 'Breakfast at Tiffany's'. The company branches out into designing accessories during the 1960s too, with the Burberry check appearing on handbags, luggage and umbrellas.

1997

Rose Marie Bravo comes on board as CEO of the company and Burberry tightens its hold on the luxury market, introducing a ready-to-wear Burberry Prorsum collection by Roberto Menichetti the following year.

2001

Christopher Bailey is appointed as creative director and marries the Burberry tradition with a cool, modern edge. The company flourishes both financially and creatively.

2009

Emma Watson appears in Burberry's advertising campaign, following in the footsteps of Kate Moss, Agyness Deyn and Stella Tennant. Burberry shows its spring/summer 2010 collection at London Fashion Week for the first time in a decade.

2004

Two Leicester pubs ban Burberry-wearing customers.

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