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What’s Ailing Mulberry?

Chief executive Thierry Andretta is trying to turn things around, but the British heritage brand is a no-show at London Fashion Week again this season after years of sluggish sales and a slumping share price.
Mulberry storefront | Source: Shutterstock
By
  • Sarah Shannon
BoF PROFESSIONAL

LONDON, United Kingdom — Anna Wintour sat front row at Emma Hill's buzzy Autumn/Winter 2013 show for Mulberry, where models paraded up and down wearing the slouchy, top-selling satchel named after British it-girl Alexa Chung that had long been a core driver of the brand's commercial success. Six years later, Mulberry is a no-show at London Fashion Week for the fourth season is a row, opting instead for a free pop-up installation; sales are middling at best; and the company, which once had a market capitalisation of £1 billion, is valued at around £187 million ($232 million).

Mulberry has been making leather handbags from its rural base in the English countryside — where half of its products are still handcrafted today — for close to 50 years. For much of this time, the brand offered quality wares at affordable luxury price points. But in 2013, then chief executive Bruno Guillon made a terrible strategic miscalculation: the former Hermès executive attempted to reposition Mulberry as a true luxury player, pushing handbag prices over £1,000, offering exotic skins and promoting the brand's "Made in England" credentials.

The move backfired spectacularly. The perception of the brand as affordable proved very hard to shift, and real luxury shoppers stuck to established European competitors while Mulberry's core and mostly British customer base felt alienated by the price hikes, resulting in poor sales and several profit warnings.

In 2015, Mulberry drafted Thierry Andretta, former chief of luxury watches and jewellery brand Buccellati who had previously worked for LVMH, to return the brand to its affordable luxury roots. But the turnaround has not been easy. Mulberry announced a widening operating loss of £8.2 million in the first half of the year, and revenue declines of 8 percent due to weak UK demand, fewer tourists and the fall into administration of department store chain House of Fraser, where Mulberry runs concessions. Shares are hovering at a near five-year low.

Meanwhile, the wider luxury market is buoyant, evidenced by strong performances at LVMH and Kering, which are also finding success with products at Mulberry's price point: take Gucci's Dionysus GG Supreme super mini-bag at £570 or Balenciaga's triangle shaped clutch at £535. What's more, a raft of Instagram-friendly, direct-to-consumer handbag brands with slick product, buzz and affordable pricing — see Wandler, Mansur Gavriel, Danse Lente and Cult Gaia — have ratcheted up the competition.

They should consider lowering their prices, upping their social media presence and converting to a more fashion-led brand.

Back in 2015, Mulberry hired Johnny Coca, a Spanish designer who worked with Phoebe Philo at Céline, to refresh the British brand's product offering, launching today's best-selling Amberley satchel, popular among young female shoppers but not as ubiquitous in the fashion press as the Alexa once was. Coca was also tasked with expanding Mulberry's offering in shoes, ready-to-wear and jewellery.

But the brand's over-reliance on the UK is a key strategic issue. Sixty-eight percent of sales are domestic, including concessions in over 30 department stores, where discounting is high and nervous British consumers are curbing spending amid Brexit concerns.

"We are quite pleased with our progress in a difficult UK market," said Andretta, sitting in his showroom at the brand's West London headquarters surrounded by pieces from the Autumn/Winter 2019 collection, including chunky gold and pearl earrings, eyelet embellished purses and faux-croc leather cross-body bags. But the executive's focus has been on the Asia-Pacific region, where he is taking control of the brand's franchisees in China, Japan and Korea, and pushing digital.

Digital sales are now 17 percent of revenue, up from 14 percent last year, and the company staged a "see now, buy now" Spring/Summer 2018 catwalk show to relaunch the label in Seoul a week before New York Fashion Week. The event cost £1.8 million in marketing investment, but helped the brand stand out on social media and prompted a triple-digit online sales increase in Korea where it has 19 stores.

And yet the company currently only has four stores in China, the world's most important luxury market, and international growth is proving difficult. Asia-Pacific sales have barely shifted, reaching £11.5 million last year, a decline from £11.65 million a year earlier, thanks in part to the closure of 7 franchise stores.

“We started really late, and we don’t want to make any mistakes in the store network," said Andretta. "The store network is small for a reason, firstly we would like to play our digital game based on omni-channel. Some big brands had overdone it [with store expansion] and are closing stores. We want to be relevant for the younger generation."

Analysts say fixing Mulberry's problems in a crowded marketplace is a Herculean task. "To move the perception of a leather accessories brand when it loses momentum is very difficult and requires time and a big communication investment," said Mario Ortelli, managing partner at luxury advisors Ortelli & Co. Even Prada, with a strong ready-to-wear business, big marketing budget and highly respected creative director, took time and hard work to reaccelerate its leather business, which suffered for years from lack of innovation and overpricing, Ortelli added. "So, when you haven't got as many levers, like Mulberry, it's a very tough exercise."

To move the perception of a leather accessories brand when it loses momentum is very difficult.

The marketing and digital strategy needs a refresh, argued retail consultant Robert Burke. “I’ve found the marketing is a little old, the styling is speaking to an older customer and it’s still in this in between area; between big designer brands like Balenciaga, and the new cheaper Instagram-friendly competition,” said Burke. “They should consider lowering their prices, upping their social media presence and converting to a more fashion-led brand.”

There's also the option of taking the brand private, cutting its exposure to UK department stores more quickly and pushing overseas without short-term profit concerns. “Its easier to turnaround a private company than a public company,” said Ortelli. “For sure, any mid-size brand like Mulberry is an acquisition target for industrial and financial investors.”

But with 93 percent of the stock privately held, much depends on the billionaire Singaporean husband and wife duo Ong Beng Seng and Christina Ong, who, together with their daughter Melissa, hold 56.17 percent of the company's total voting rights. They invested in the company in 2000 and have held a majority stake since 2003. The Ong family could not be reached for comment.

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