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The fashion label was in dire trouble before Angela Ahrendts took over. Now, seven years on, she is among the best-paid bosses in Britain

New Palestine, Indiana, (population 2,000) is as far removed from the runways of London, Paris, Milan or New York as it is possible to imagine. But it was here, in a house so crowded she carved out a refuge for herself in the cupboard under the stairs, that Angela Ahrendts first set her sights on a career in fashion. Now as chief executive of Burberry, she’s one of the most powerful figures in the big-ticket world of luxury labels – and one of Britain’s best paid bosses: taking home £17m in 2012 (more than any man working for a FTSE-100 blue-chip company that year) and another £7m this year.

“It was always fashion,” she says. “If you read my high school yearbook, I was [someone] who at 16 knew exactly what I was going to do.”

What she has done, in the past seven years, is turn Burberry from a label that had become associated with baseball caps worn in nightclubs to the biggest British high-fashion brand, which ranks alongside anything the ateliers of Paris and Milan have to offer. She has signed up actors such as Eddie Redmayne and Emma Watson as the faces of the brand – and scored a huge publicity coup when she put Romeo Beckham in one of Burberry’s trademark trench coats for a series of glossy magazine adverts.

Ahrendts sells at eye-watering price points: Burberry sells £14,000 alligator bowling bags, animal-print trench coats in calfskin for £5,500 and £95-a-pair babies’ booties to buyers all over the world – but especially in Asia – and as a business it is now worth £6.5bn – just a fraction less than Marks & Spencer.

Ahrendts went to Indiana’s Ball State University aiming to make it as a designer, but soon realised she lacked the raw design talent of her fellow students. What she did have, though, was “very strong opinions on everything they would do”. She recalls: “A professor eventually sat me down and said: ‘We call that [being] a merchant.’”

Her ambition was evident from the outset. The day after graduating she boarded a plane for New York to bang on doors on Manhattan’s Seventh Avenue – leaving her primary school sweetheart Greg Ahrendts behind.

It was the start of a 17-year distance relationship. She lived in a tiny midtown apartment and worked 80-hour weeks climbing the New York fashion career ladder, with stints at Donna Karan and Liz Claiborne, the company that owns Juicy Couture. Eventually she married Greg, who moved to New York and started a contracting business.

Then, when she “finally had my life under control”, her phone rang. It was Rose Marie Bravo, the then chief executive of Burberry, asking her to take on the mantle of the 156-year-old British label.

“No, no, no,” Ahrendts replied. “I finally had the country home, the three kids, the dog,” she said in an interview with US chatshow host Charlie Rose. “I didn’t even meet her after the first call. I had the greatest job on Seventh Avenue. I honestly didn’t think life could ever be any better. It was just peace and happiness.” But Bravo kept calling, and she went to meet Christopher Bailey, Burberry’s up-and-coming designer. “We had lunch that day for three and a half hours and on the back of a napkin put our dreams on paper,” she says. “I loved him. I have such respect for him, he’s a very special person.”

Bailey, whom Ahrendts had worked with at Donna Karen, says it’s “sort of weird how much Angela and I connect. I knew that [meeting] was going to be a big moment in my life, and it was,” he told the Wall Street Journal in 2010.

Ahrendts was still unsure of making the “very, very big move” across the Atlantic as someone who, in her son’s words, is “half a century old”. “[Having to] sell your homes, unplug your kids from school. This had to be right.”

Burberry’s history, from its founding by draper’s apprentice Thomas Burberry to supplying trench coats to troops in the first world war and dressing Ernest Shackleton for the Antarctic, convinced her it was the right thing to do. But when she arrived for her first day in the job in London – after relocating Greg and her son Jennings, 17, and daughters Sommer, 16, and Angelina, 12, to a house 20 minutes west of the city – it became clear that the rest of Burberry’s executive team had little love for the brand.

“They had flown in to classic British weather, grey and damp, but not one of these more than 60 people was wearing a Burberry trench coat. I doubt many of them owned one,” she said in a Harvard Business Review article this year. “If our top people weren’t buying our products, despite the great discount they could get, how could we expect customers to pay full price for them?”

Justine Picardie, UK editor-in-chief of Harper’s Bazaar, says Ahrendts spotted the problem early – Danniella Westbrook. The former EastEnders actress, who lost her septum through chronic cocaine use, had been splashed across the papers dressed head-to-toe in Burberry’s check. Her baby daughter was also kitted out in Burberry, and Westbrook had a beige-check pram. The distinctive check, which dates back to the 1920s, had also become uniform of choice for yobs and football hooligans.

“Burberry had become so associated with a downmarket image,” says Picardie. “That iconic plaid had become… I’m not going to use the word chav, but that incredible legacy had become associated with the cheapest form of disposable rip-off fashion. Ahrendts and Christopher Bailey have taken it back to its pure heritage.”

Bringing the brand back from the brink was a hard, expensive slog involving buying back 23 licences Burberry had sold to allow other firms to put its check on everything, including disposable nappies for dogs.

“I feel like I spent my first few years here buying back the company – not the most pleasant or creative task,” she says. “But we had to do it. If you can’t control everything, you can’t control anything, not really.”

Creative control was given to Bailey, 41, whom she appointed “brand tsar” and then chief creative officer. “Anything that the consumer sees – anywhere in the world – will go through his office.”

It won her few friends at the start. Within a year she had fired the whole of the company’s Hong Kong design team and closed factories in New Jersey and the Rhondda Valley, south Wales, to centralise manufacturing in Castleford, West Yorkshire. Closing the Welsh factory caused a political firestorm and she was hauled before parliament to explain the decision.

But her relentless focus on reviving Burberry’s heritage to the “millennial” digital generation – which includes selling trench coats with mink collars, alligator epaulettes or studded leather sleeves – has worked wonders. Annual sales have more than doubled since 2007 to £1.9bn, and the share price has doubled since she took over in 2006 to £13.70. Ahrendts, who starts work checking her emails and social media before 5am most days, has benefited to the tune of £23.7m in pay, bonuses and perks over the last two years.

The perks of the job include a chauffeur-driven black Jaguar, help towards the cost of sending her children to an American school in London, and a £25,000 annual clothing allowance –on top of her 80% staff discount.

The clothing allowance is the best money Burberry could spend, according to Picardie, who says Ahrendts, who stands more than 6ft in heels, is “the best advert for Burberry Prorsum”, its haute couture range. “She is always in Burberry Prorsum, and she wears it well,” Picardie says. “She shows how Prorsum can be worn by women other than Cara Delevingne and other glamorous young girls in its campaigns. She is wearing it as a consummate professional independent woman and is a very good advert for people that can actually afford to buy it.

“She is the opposite of the flashiness of Rich Ricci [the Barclays investment banker who topped the City pay league in 2011]. She is the antithesis of the hot air, flashy, empty, hollow men. She has substance.”

Picardie says those in the fashion industry believe Ahrendts – who is a relatively unknown figure to fashion editors but is close friends with Will.i.am – is worth every penny because she’s “not only revitalised Burberry, but helped make British fashion a massive success” by bringing Burberry’s premier fashion shows back to London.

Sir Harold Tillman, chairman of the British Fashion Council, says he had made convincing Ahrendts to bring Burberry’s shows back to London his “key mission”.

“The very first time I went to meet her when she had just taken over I was so nervous it felt like my first job interview because it was so important to get her to bring the shows back,” he says. “She sat there and listened to everything I had to say, and six months later Burberry [womenswear] came back and put on the best possible show.”

Burberry has led the charge for other designers to show in London and ensures that the likes of Vogue editor Anna Wintour will now always come to London fashion week. On Tuesday Burberry will also bring its menswear show from Milan to London’s Kensington Gardens for the first time in more than a decade.

The day after Ahrendts’s massive 2012 pay deal was reported by the Guardian last week a Burberry executive emailed all staff seeking to quell any resentment by explaining that most of the money was from previously awarded bonuses.

“There’s no resentment. Everyone knows it’s an insane amount, but everyone thinks she’s totally worth the money,” a Burberry executive said. “Everyone loves her.”

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