Sales are continuing to slide at Mulberry as the handbag designer battles to win back its core British customers.
The struggling leather brand, which has issued three profit warnings and lost its chief executive and top designer in the past year, posted a 46 per cent plunge in annual profits to £14m yesterday. In the 10 weeks after its financial year ended on 31 March, underlying sales in stores open longer than a year tumbled 15 per cent.
Godfrey Davis, the executive chairman who stepped in to run the business when Bruno Guillon was sacked as chief executive in March, hopes a new line of cheaper bags, called Tessie, will bring it back into fashion.
Mulberry was heavily criticised for going too upmarket under Mr Guillon and pricing out its core British customers in pursuit of wealthy overseas shoppers. Mr Davis said yesterday that Mulberry had lacked "new and interesting products in the key price range of £500 to £800" but he insisted that the cheaper range "is fine-tuning, not a U-turn". He added: "We are a luxury brand but we try to be fair value for money."
The Tessie line, launched two weeks ago, had made "an incredibly good start".
The group is also still searching for a creative director after Emma Hill quit last year. She was credited with introducing its bestselling "It bags", such as those named after the presenter Alexa Chung and singer Lana Del Rey.
Mr Davis said the group wants a creative director before it gets a new chief executive and he plans to run the brand for a while to "restore the business to growth".
He said the £500 to £800 bags will account for 40 per cent of its entire range – up from less than 24 per cent a year ago – adding that last year, bags selling for more than £1,000 made up more than 54 per cent of the collection. They now make up less than 30 per cent.
A surge in sales for brands selling bags at about £300 led analysts to suspect that Mulberry is still too expensive but Mr Davis added: "We think our price positioning is good. It is a competitive market but we sell fair-value, beautiful products."
While the brand restructures, Mr Davis expects to see double-digit declines in the wholesale business in the coming year. He said Mulberry will continue to expand but will open fewer new stores than last year while it concentrates on a flagship store in Paris, due to open next year.
After increasing its factory output in the UK with a new factory in Somerset, Mr Davis said more than 50 per cent of its handbags are now made in the UK. He also argued that the 15 per cent fall in sales in the past 10 weeks was against a comparison of sales up 6 per cent last year when it sold off products at a discount and through outlets to make way for newer, high-end products.
Shares in the Aim-listed group, which is majority owned by the Singaporean investors Ong Beng Seng and Christina Ong, have fallen by more than a fifth this year. They closed up 22p at 730p.