Breakout

Apple Hires Burberry CEO in Tim Cook’s Best Decision Yet

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After an agonizing year long search Apple (AAPL) has finally found someone to run its retail locations and online store. Effective next spring current Burberry (BURBY) CEO Angela Ahrendts will join Apple in the newly created role of senior vice president and member of the executive team reporting directly to CEO Tim Cook.

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With this hire, Apple isn't just filling a job vacancy. This is a statement. Ahrendts is an internationally respected merchant at one of the world's prestige brands. During her seven years in the top job, Burberry's revenues have nearly tripled and shares rose more than 300%. She's social media savvy and proved it with the company's Spring/Summer 2013 teaser video starring Romeo Beckham that went viral.

Forget the gold iPhone, the iOS tweaks and mini-iPad form factors. Angela Ahrendts is by the far the smartest, boldest move Tim Cook has made as Apple CEO. Bringing her on board shows Apple's commitment to staying out of the commodity war with déclassé operations like Samsung (SSNLF).

Here are a few of the reasons why hiring Angela Ahrendts is the best thing to happen to Apple in years:

Nothing about Ms. Ahrendts is discount

Ahrendts made more than $26 million last year. She manages a top brand. In other words, she doesn't seem the type to sign sweeping agreements putting Apple's high-end products next to battery displays in your local Walmart (WMT). In 2007 Apple invented a whole new product category with the first iPhone. Six years later what was miraculous is now mundane. It's impossible to buy a smartphone that can't take pictures, send text messages or run Facebook (FB). Apple still designs great products, but its secret sauce is marketing.

What distinguishes Apple is the label and the customer experience. Ahrendts spent six years convincing customers around the world to pay a premium for Burberry scarves and handbags. Surely she can do the same with iPhones and tablets.

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Reinvigorating store morale

Apple's stores were conceived and created by Steve Jobs and Ron Johnson (the former head of Apple retail and former JCPenney CEO). No expense was spared. Details like a Genius Bar and roaming check stands blew customers away. After Johnson left in 2011 Apple hired John Browett after a six-month long search. Browett's top priority was shifting associate focus from service to sales. He didn't just cut expenses, he cut salaries.

When retail clerks don't feel respected they pass that feeling along to the customer. Since Steve Jobs died and Ron Johnson left the company, Apple store workers have been alternately ignored. Hiring an incredibly accomplished woman who runs one of the world's top brands will do more for Apple store morale than a million pep rallies or sale contests ever could.

She's a merchant; not a stock buyback or dividend

For more than a year Apple CEO Tim Cook has been listening to frustrated Apple shareholders demand stock buybacks, dividend hikes and even stock splits. Last August activist investor Carl Icahn actually boosted Apple's share price via Twitter.

The assumption behind all these tactics was that Apple and Tim Cook had run out of organic ways to grow earnings. No matter what Angela Ahrendts ends up getting paid for reinvigorating Apple's store base, it will be a tiny fraction of how much Apple is spending on dividends and share buybacks. Nothing drives a stock as much as performance. If Ahrendts performs anywhere near as well as her track record suggests, she's a bargain.

Apple's dirty little secret is that it's a retailer. Between the stores and iTunes, Apple's competitive advantage is the quality of the customer interaction. By finally bringing in a true merchant Apple is getting back to basics in the very best way.

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