“In Transition” Mulberry’s Profit Halved, Sales Decline

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New Tessie Collection

New Tessie Collection

Somerset, England—It’s a good thing Mulberry plans to emphasize lower pricepoints. The previous strategy under ousted CEO Bruno Guillon that saw the luxury leathergoods maker’s price exceed $1,000 has been dropped.

On Thursday, Mulberry reported its pre-tax profit for the year ended March 30 fell by nearly 50%, falling to 14 million pounds (about $24 million) from 26 million the previous year, in line with its warning in April.

‘Rebalancing’ Act

Total sales fell 1% to 163.5 million pounds, Mulberry said. In the 10 weeks ended June 7, retail sales slid 9% compared with the same period a year ago, while on a like-for-like basis, the decline was 15%. (Retail sales accounted for about 70% of total sales).

Back in April, Mulberry decided to release a more “affordable” range of luxury handbags. The Tessie collection–retailing at around 600 pounds–was seen as a chance for the company to capture the middle ground that it had previously deserted.

CEO Godfrey Davis referred to Mulberry as “rebalancing” its range. He insisted that it is “not a major change in strategy”, but added: “It is an important change to customers, who perhaps felt we weren’t listening to them.

Davis added that the new range launched two weeks ago is “proving popular” but Mulberry hasn’t managed to stop the trend of falling sales.

“The outlook for the current financial year remains challenging. Although there are encouraging signs in our own full price retail business, including the well-received launch of the new Tessie collection, we expect the improvement in sales will be progressive,” Mulberry said.

“Mulberry enters the new year in a state of transition,” Helen Norris, an analyst at Barclays, who lowered her estimate for 2015 pretax profit to 10 million pounds from 11 million pounds, saying that the first half “looks especially tough.”

Mulberry’s stock has declined 26% this year and the handbag maker lost two-thirds of its value during Guillon’s two-year tenure.