An ill-judged strategy by handbag-maker Mulberry to move upmarket and become a rival to luxury brands such as Gucci and Dior backfired badly, the Somerset firm has confirmed. Profits crashed from £14m to just £1.9mfor the year to the end of March as sales to retailers slumped by 29%.
But on Thursday, as the company unveiled the damage from the strategic error – which cost chief executive Bruno Guillon his job – Mulberry said it has recorded a big uplift in sales following efforts to spruce up its ranges and cut prices to more affordable levels, which have started to woo back customers. Mulberry said its wholesale partners were starting to order again.
After Guillon was ousted in spring 2014, former Mulberry boss Godfrey Davis stepped in as executive chairman to perform a strategic U-turn and reconnect with Mulberry’s customers in the UK, who bridled at the thought of spending more than £1,000 on a bag.
The firm’s new chief executive, Thierry Andretta, who joined in April, said the strategy was “beginning to bear fruit”.
Mulberry also has a new creative director, Johnny Coca, who was recruited from Céline last year. He starts his new role in July.
Most of Mulberry’s leather bags are now priced at between £500 and £1,000. The bestselling Bayswater costs £895; the Lily, named after model Lily Cole, is £650. Not all prices have come down: the Alexa bag, named after TV presenter Alexa Chung, is now priced at £1,100 – up from £895 two years ago. Mulberry said the price rise was the result of the bag now having more components. The Bayswater bag in ostrich, which was £3,500 three years ago, now costs £4,500.
However, bags under £1,000 now make up 71% of the collection, compared with 46% last year and the return to more affordable ranges, including the cheaper Tessie collection of bags, along with a tight grip on costs, have rekindled Mulberry’s popularity Nevertheless the shares lost 0.4%, and closed at 901p Three years ago, before the strategy mistake, they were changing hands at more than £23.20.
Conlumino consultant Andrew Hall said: “Whether or not Andretta and Coca can return Mulberry to the heights achieved under former creative director Emma Hill remains to be seen. While a more sensible price strategy and stable leadership was clearly required, Mulberry must now surely undergo a period of self-reflection to ascertain the extent of the damage the brand may have sustained during its exclusive luxury experiment.
“In this regard it may well take more innovative measures to rehabilitate Mulberry as an affordable luxury retailer of British heritage; the ongoing expansion into smaller, entry-level leather accessories appears to reflect this strategy.”
Retail sales – through Mulberry’s own stores – have been improving since November following the launch of the spring/summer 2015 collection with British model Cara Delevingne. They were up 15% on a like-for-like basis, stripping out the benefits of new stores, in the 10 weeks to 6 June. About half the group’s products are made at Mulberry’s two factories in Somerset. It plans to open more factories in the UK as revenues increase.
A Mulberry flagship store opened in Paris in April and is trading well. Mulberry, which was founded in 1971 by a young English entrepreneur, Roger Saul, now has 70 directly operated stores after opening four in the US and Germany last year.
Digital sales rose 15% to £18m in the past year, increasing their share of group sales to 12% from 10% in 2014.
guardian.co.uk © Guardian News & Media Limited 2010