SNN Smith and Nephew Plc New

By Saabira Chaudhuri 

Burberry Group PLC has named luxury veteran Marco Gobbetti as its new chief executive, replacing Christopher Bailey who has attracted strong criticism during his two-year tenure as the British fashion label's CEO and creative head.

The company is also replacing its Chief Financial Officer Carol Fairweather, who has worked closely with Mr. Bailey since he became CEO in May 2014, with the CFO of global medical technology business Smith and Nephew PLC, Julie Brown. Smith and Nephew said the search for a new CFO is under way.

Burberry's surprise announcement--which comes after investors have for months groused that the 45-year-old Mr. Bailey was ill-equipped to juggle the dual roles of CEO and creative head of a company Burberry's size--sent shares up 6.4% in afternoon trading in London to GBP12.36 ($16).

Mr. Gobbetti, the CEO and chairman of Céline, the influential LVMH-owned fashion and accessories brand, has worked in luxury for the past 20 years on brands such as Givenchy, Moschino and Bottega Veneta.

The company didn't name an exact date, only saying Mr. Gobbetti will begin as soon as he is contractually able to do so. Ms. Brown will start as CFO in early 2017.

Mr. Gobbetti's appointment comes as Burberry has seen sales hammered in key markets such as Greater China and the U.S. for a string of quarters, with little respite. The company's shares have dropped 22% since Mr. Bailey replaced longtime CEO Angela Ahrendts at the helm.

"This is a step forward for Burberry, where we perceived a need of reinvention and stronger direction," said Exane BNP Paribas analyst Luca Solca.

Mr. Bailey--who has been demoted to Burberry's president and chief creative officer--recently announced a cost-cutting program and a share buyback but the moves did little to quell disquiet about the company's long-term prospects.

On Monday, analysts cautioned that the management changes aren't a panacea.

The company's sales per square foot have generally lagged behind those of peers while its store network has left it worse off than rivals in recent months.

Burberry has a large store footprint in China where sales have been hit by an anticorruption drive, and in Hong Kong where sales have fallen following unfriendly visa policies that have discouraged visitors from mainland China.

Relative to peers such as LVMH Moët Hennessy Louis Vuitton SE and Prada SpA, Burberry is underrepresented in Europe and Japan, which have seen an influx of Chinese shoppers.

While Mr. Gobbetti has a wealth of experience in the luxury sector, Celine is a much smaller company than Burberry, logging roughly EUR600 million ($664 million) in fiscal 2015 sales according to Mr. Solca's estimates. Burberry last year reported GBP2.51 billion ($3.26 billion) in sales.

Both Mr. Bailey and Mr. Gobbetti will report directly to Burberry's Chairman John Peace. Monday's arrangement, should it last, is something of a coup for Burberry since Mr. Bailey--who has been with the company since 2001--is widely known as being the face of the brand and losing him entirely would have been a significant blow for the British trench coat maker.

The new arrangement will bring Burberry closer to the management structure it followed under Ms. Ahrendts, where chief executive and design responsibilities were handled separately.

While Mr. Bailey's background is largely in fashion--he graduated with a BA in fashion design from the University of Westminster in 1992--Mr. Gobbetti's background is more business-focused.

Mr. Gobbetti has a degree in Business Administration from the American University of Washington and a Masters in International Management from the American Graduate School of International Management in Phoenix, Arizona. He served as the CEO of Givenchy from 2004 to 2008 and before that was the CEO of Moschino.

Burberry reports first-quarter sales on Wednesday and has its annual shareholders meeting scheduled for Thursday in London.

The company in May said it would work to save at least GBP100 million a year by fiscal 2019 by reducing complexity, simplifying processes and eliminating duplication in its operations. Burberry's operating expenses are close to 500 basis points higher than its peers according to UBS, with the company hiring about 15% more sales staff.

Burberry on Monday highlighted Ms. Brown's experience in driving cost-savings and restructuring programs at Smith and Nephew while also pointing to her experience in growing revenue and profit margins.

Ms. Brown, who will be Burberry's new finance and operations head, takes up some of the duties of Chief Operating Officer John Smith, who Burberry last month said was leaving the company next summer to pursue other interests.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

July 11, 2016 10:35 ET (14:35 GMT)

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