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Mulberry FY Profits Drop 50%

British accessories firm expects to see improvement in second half.

LONDON — Mulberry’s road to recovery will be long — but a new beginning is in sight, the company’s executive chairman Godfrey Davis told WWD Thursday.

In the year to March 31, Mulberry Group saw its profits fall more than 50 percent to 8.6 million pounds, or $13.7 million, due to a series of one-off costs and a dip in sales, which the company had warned about in the spring.

The drop came in part from a decision to write down the net carrying value of two U.S. stores, creating a non-cash charge of 2.7 million pounds, or $4.4 million. The company had also warned that costs related to the exit of former chief executive officer Bruno Guillon earlier this year would also dent profits.

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Sales in the 12 months dipped about 1 percent to 163.5 million pounds, or $260 million, dented by a 6 percent fall in wholesale sales. As reported, Mulberry’s South Korean clients abruptly canceled their orders earlier this year. The country represented about 20 percent of the wholesale business.

Dollar figures have been calculated at average exchange rates for the periods to which they refer.

It’s been a turbulent 12 months for the British brand, which lost both Guillon and its creative director Emma Hill. Mulberry issued multiple profit warnings after its attempts to move upmarket too rapidly, a move that left its core British customer behind.

Davis, who had helped steer Mulberry to success as ceo before Guillon’s arrival, is now running day-to-day operations as executive chairman. He said during an interview that growth is once again within Mulberry’s grasp.

“I think the first six months of this year will be difficult, but there will be green shoots,” David said. “The second half will see improvement, and we’ll see the full benefit of the changes we’re making in the 2015-16 year.”

Davis said the brand would remain a luxury player, but one that sells product suited to modern lives and real people. Indeed, earlier this week, Mulberry revealed that Thierry Andretta had joined its board as an independent non-executive director, with immediate effect.

Andretta is currently ceo of the Italian jewelry brand Buccellati, and has worked at Lanvin, Moschino, the former Gucci Group, LVMH Moët Hennessy Louis Vuitton, Céline and Emanuel Ungaro.

One of Davis’ first efforts has been to reintroduce a more accessible price range.

“We have listened to our customers and are introducing attractive new products in the key 500 [pounds] to 800 pounds price range,” said Davis. At current exchange, the bags cost $840 to $1,340.

“As a first step, we introduced the new Tessie collection two weeks ago, which is proving popular,” said Davis, adding that the bags have been on the shop floor for the past two weeks, and have already joined the ranks of Mulberry’s bestsellers.

He said one of the big mistakes that Mulberry had made over the past 18 months was to take its eyes off the entry price level, and put too big a focus on the stockkeeping units at the top. Now, he said, Mulberry is seeking a more balanced product offer.

“Things did go wrong in the past, but some things went right,” he said, pointing to the success of the Willow bag, which is priced at 1,500 pounds, or $2,500.

The current fiscal year is off to a sluggish start, with total retail sales 9 percent below the corresponding period last year, and like-for-like sales down 15 percent in the 10 weeks to June 7. A double-digit decline in wholesale sales is expected for the 2014-15 year.

Davis clarified the first-quarter figures. He said they were distorted by major clearance activity in the corresponding period last year for the Alexa and Bayswater bags, and added that none of the company’s recent changes had come into effect for the first eight of those 10 weeks.

Davis said a backpack designed by Cara Delevingne would hit shelves in September and will continue into spring 2015. Mulberry has added pouches and small leather goods to the Delevingne offer.

Asked about succession plans, he said the company’s priority was to lock in a new creative director before beginning a hunt for a new ceo. With regard to store openings, the brand plans to open five new units this year, in Las Vegas, Dallas, Germany and France. It will open its Paris flagship on Rue Saint-Honoré next year.