Mulberry says overhaul will take time as sales drop further

Mulberry's  Spring/Summer 2014 collection
Mulberry's Spring/Summer 2014 collection
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LUXURY HANDBAG maker Mulberry said it would take time to return to growth and hire a new creative and management team after an ill-fated attempt to move upmarket took its toll on sales and profits.

The brand, hit by a string of profit warnings, said the full benefits of its strategic U-turn would start to be felt only next year when its first lower-priced autumn and winter collection hits the stores in May.

Mulberry declined to provide a sales growth forecast for the current year, with executive chairman Godfrey Davis only admitting that “this is a reasonably tough year for us”.

Mr Davis, however, said he expected trading to improve in the second half of the year thanks to new product launches.

Mulberry whose retail same-store sales fell 3 per cent in the year ended March 31, witnessed a further drop of 15 per cent in the 10 weeks to June 7, a performance it said was worsened by comparing it with last year’s boost from clearance sales.

The brand’s retail sales, from directly operated shops, represent about 70 per cent of total revenue.

Mulberry is represented in Yorkshire with two stores in Leeds – in House of Fraser and the Victoria Quarter – and one in York.

The brand also posted a near halving of pre-tax profit in the year to March, falling to £14m from £26m the previous year, in line with its warning in April.

“Mulberry enters the new (fiscal) year in a state of transition,” Barclays said in a note.

Mulberry is working on strengthening its product offering at a price range of £500 to £800 to win back customers put off by its previous focus on handbags priced at over £1,000.

Mulberry, like rivals Louis Vuitton and Gucci, is struggling to compete against more accessible, trendy fashion brands such as Michael Kors which give customers the look and feel of luxury at a fraction of the price.

Mr Davis explained that Mulberry, known for its classic brown leather bags with locks inspired by a postman’s satchel, was going back to its roots of providing people with “everyday, practical and beautiful things”.

The priority for the group is to hire a new creative director following Emma Hill’s departure last September, he said, adding that he hoped this would be done before the end of the year.

“Once we have settled the creative director appointment we will look for a new CEO, though of course we have started doing some initial research,” Mr Davis added.

Finding replacements for creative directors can be a long and arduous task. LVMH’s Dior took more than a year to do so after sacking star designer John Galliano for a drunken anti-semitic rant in a Paris bar in 2011.

Mulberry’s chief executive Bruno Guillon left in March, prompting Mr Davis, the chairman, to step in to run the group until a replacement was found.

But the group this week took steps to strengthen its board by hiring as non-executive director the luxury industry veteran Thierry Andretta, former CEO of French luxury brand Lanvin.