LONDON — As British retailers plan to reopen their stores on June 15, the consequences of extended closures due to COVID-19 are being laid bare: On Monday, Mulberry put the wheels in motion to cut its staff numbers by 25 percent, with some 474 jobs at risk.
Mulberry said given the uncertainty about the impact and duration of COVID-19 on the company and the wider economy, and the effect of the store closures, “we expect the recovery in our overall sales levels over the medium term to be gradual. Even once stores reopen, social distancing measures, reduced tourist and footfall levels will continue to impact our revenue.”
As a result, the company said it has to manage its operations and cost base accordingly to ensure the company “is the correct size and structure to reflect market conditions.” It said it has launched a consultation process on proposals to reduce employee numbers by approximately 25 percent across the global business. Consultations take place with unions and workers before layoffs are made official.
Thierry Andretta, Mulberry’s chief executive officer, said the brand had reacted swiftly to manage the impact of COVID-19 and continues to execute “a well-developed plan to manage capital, reduce costs and maintain a robust liquidity position.”
He added that “in spite of the good performance of our sector-leading digital and omnichannel platform, and our global network of digital concessions, the shutting of all our physical stores has had, and will continue to have, a marked effect on our business.”
He said taking the steps toward laying off staff “has been an incredibly difficult decision for us to make, but it is necessary for us to respond to these challenging market conditions, protect the maximum number of jobs possible and safeguard the future of the business. We remain confident in the strength of the Mulberry brand and our strategy over the long-term.”
Mulberry confirmed that the majority of its stores have remained closed since the end of March. It has reopened stores in China and South Korea and, more recently, some stores in Europe and Canada.
It has continued to trade through its digital channels, which have operated in all markets without interruption. The digital sales performance has been good, Mulberry added, but cannot fully offset the decrease wrought by store closures.
The company said it continues “to proactively manage capital and reduce costs” and has taken all the necessary steps to manage its inventory levels in line with anticipated demand.
Mulberry said it is also maintaining a positive dialogue with the company’s lenders to ensure it retains its “robust liquidity position.” It confirmed that it has net cash on hand, and its borrowing facilities remain undrawn. Full-year results for fiscal 2019-20 will be released in August.
Shares were down 1.53 percent to 1.93 pounds at the close of trading on Monday.
Mulberry’s news came as Springboard, which measures retail footfall in the U.K., said the drop in footfall in May was 73.3 percent, an unprecedented low, despite the hot, sunny weather and the two long weekends. The May figure improved marginally from minus 80.1 percent in April.
Nonessential retail stores in England are set to reopen on June 15.
Diane Wehrle, Springboard marketing and insights director, said the subject on everyone’s lips “is what will the likely success be of the reopening of nonessential retail” next Monday. “The limited evidence so far has suggested that despite the growth in online shopping over the past two months, there is a huge amount of pent up demand amongst consumers for bricks-and-mortar shopping.”
Wehrle added the key trend to be watched over the period of retail reopening in June, and over subsequent months, will
be whether the easing of lockdown will mark the start of a new era for local U.K. high streets. “What is likely is that those destinations and retailers that are best able to manage customer numbers to ensure social distancing will be the most in demand by consumers as safety during shopping is paramount.”
Earlier this year, as part of its quest for transparency across the business, the brand decided to harmonize the prices of its leather goods for customers, whether they’re shopping online or offline in Shanghai, London or Los Angeles.
Mulberry began rolling out global pricing last year with the launch of its collaboration with Acne Studios, and continued in that vein with the eco-conscious M Collection that was introduced earlier this year. The new, standard pricing will be achieved by bringing international stickers in line with U.K. ones, inclusive of any local sales taxes, VAT or duties.
The rollout began with the leather goods categories, which account for approximately 90 percent of the brand’s revenues, with further categories to follow. Global prices for leather goods came into effect at the end of April.
The shift was facilitated by the fact that some 95 percent of Mulberry’s sales are direct-to-consumer via its omnichannel business model.