Mulberry’s latest attempt to improve its dire performance is an advert with a unicorn and a waving puppy.
The video – which has had more than 1.25 million viewers – was created by John Lewis Christmas ad agency adam&eveDDB. But forget the schmaltz and sentimentality of most of the retailers’ Christmas ads. This one is firmly tongue inserted in cheek. It is the story of a spoilt rich girl whose family is competing to give her the best Christmas present. The #winchristmas video pits family members against each other with gifts including a portrait, unicorn and waving puppy. But these are all trumped by the savvy grandma who presents a Mulberry bag.
Even Mulberry’s executive chairman Godfrey Davis was pleasantly surprised with the reaction – and this company needs some good news. The number of hits is “well above anything we have done before” and was part of its plan to “re-engage” with its customers.
The problems at the luxury handbag brand started back in 2011 when it decided to implement a strategy to move upmarket to compete with other top luxury labels. The then-chief executive Godfrey Davis became chairman and hired former Hermès director Bruno Guillon to implement it. But what followed was a series of profit warnings and the shares crashed more than 70 per cent from their 2012 peak. Factors such as increased leather prices and its move to make more bags in Somerset increased the price tag of its most popular bags. But with a focus on the £2,000-plus bracket, with products made from exotic skins, its core customer – used to paying about £500 – was alienated.
But perhaps its biggest disaster was letting its star designer and creative director Emma Hill leave without lining up a replacement. Ms Hill did her last fashion show in September 2013 and the company hasn’t staged a full fashion show since. Mulberry was left with no sign of a replacement, and suffered tumbling profits to the distress of shareholders – who include Singapore’s Ong Beng Seng and his wife Christina Ong. Mr Guillon left earlier this year after two years in the post and Mr Davis returned to run the business.
Mr Davis’ biggest coup is finally finding a creative director. Last week he announced it had hired Céline accessories designer Johnny Coca, who will join next year. This is great news as Mr Coca is credited by the fashion world with some of the hit accessory trends of recent seasons. He created the pochette – the zip pouch/clutch type trend, the slip-on “skateboard shoe” style, the pimped up Birkenstock sandals or “sliders” as Americans call them, as well as hit Céline bags the Trapeze and Nano.
The new appointment was welcomed by the City and shares shot up 8 per cent on the news but its first-half results – released yesterday – show how much needs to be done.
It revealed an as-expected £1.1m loss – down from a £7.2m profit the previous year – while overall sales tumbled 17 per cent to £64.7m. Despite the loss, the key figure for the market was that for the nine weeks to the end of November total retail sales were up 8 per cent and online sales jumped 18 per cent compared to the same period last year. Mr Davis says that after a string of profit warnings its new strategy to “return Mulberry to growth” was “beginning to bear fruit”. The run-up to Christmas and January is key for the brand but sales were “encouraging”. Mr Davis says sales of its new bags at about the £500 level – including the Tessie and its Blossom tote – were strong, while its more expensive Cara Delevingne bags – designed in conjunction with the supermodel - were also selling well even at the higher price points. New colours and more smaller leather accessories have also been helping trade and it will continue to open new stores around the world with a big Paris flagship planned for next year.
The new strategy, put in place by Mr Davis, is to make sure there are enough of its “entry price point” bags and that it advertises these alongside its top-end products.
Bags at £500 and under now make up 5 per cent of products, those between £500-£800 are about 40 per cent of the range, bags in the £800-£1000 are about a quarter of its collection and those at a £1,000 or more are nearly a third, Mr Davis said this split will be maintained. About 50 per cent of its bags are made in England.
Despite the loss yesterday, Mulberry has managed to win some City analysts over and shares rose more than 1 per cent. Fiona Cincotta, a market analyst at Finspreads.com, says: “Mulberry showed signs of improvement in its first half, with increases in sales directly related to the handbag maker ditching its failed attempt to become a ‘millionaire-bracket’ luxury brand.
“The market will also take heart from the fact that recent sales uplift largely came from its new handbag ranges which seek to maintain a luxurious lustre at a fraction of previous prices.” She adds: “Another sign that the company is on the path to recovery is that it has got a grip on the much-feared gross margin slippage.”
So all Mr Davis has to do is keep the ship steady and keep sales in positive territory until Mr Coca arrives. Mr Davis confirms: “My objective is to retain this steady growth so when he joins he can take us on our next step forward.”
If the number of views of its #winChristmas video are anything to go by then Mr Davis might have Christmas wrapped up.Reuse content