Burberry was considered gang wear; now it's worn by Emma Watson and Kate Moss

Mario Testino

Even if you don’t know the name Burberry, you would probably recognize its trademark black, tan and red check pattern. Founded in England more than 150 years ago, the once small brand, which introduced the waterproof fabric gabardine and trench coats, has been embraced by celebrities, royalty and preppies alike.

Not too long ago, Burberry was at risk of being dismissed as frumpy and over-extended, however. It was even considered gangwear. Due to rumors that the Burberry brand was popular amongst hooligans, two pubs in Leicester famously banned anyone wearing the label.

New leadership and savvy product design are what transformed the brand into one of the hottest fashion labels, say retail experts. Christopher Bailey, Burberry's creative director since 2001, overhauled the brand with a mix of modern and classic looks that included a sexier trench coat and swimwear, and snapped up high-profile celebrities like Kate Moss and actress Emma Watson of Harry Potter fame.

An increase in Burberry's sales is proof that luxury brands are staging a comeback with shoppers, according to analysts. Sales rose 27 percent to $747 million in the third quarter ended Dec. 31 and may expand 11 percent in the fiscal year ending March 2012, reported The Market Oracle. Burberry has also been steadily expanding in China and built 50 stores in 2010.

The Lesson: Brands can be successfully revamped by adapting current styles while celebrating its history. "Burberry is about heritage, but about making that heritage relevant for today," said Bailey in 2009. "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."