Once-thriving Mulberry warned investors Wednesday that it will not meet profit expectations for 2013. Since the announcement, shares in the company fell a significant 28 percent.
What's more, Mulberry is failing to sell the product that put it on the map: handbags. The company has enjoyed years of issuing one It bag after another, but says it suffered over the holiday season due to pricing competition and a significant number of cancelled wholesale orders from Korean customers. Total retail sales were 3 percent below last year for the 17 weeks leading up to Jan. 25, and wholesale sales for the year ending on March 31 are expected to be down 10 percent compared with the same period last year.
"Due to tough trading conditions over the Christmas period which saw significant discounting across the market, Mulberry has experienced lower than expected UK retail sales which, together with wholesale order cancellations from Korea, will adversely impact our profit this year," Bruno Guillon, Mulberry's CEO, commented. "Despite this, the company continues to be cash generative and to invest in the ongoing process of transforming Mulberry from a domestic to a global luxury brand, the progress of which is demonstrated by the continued growth in international retail sales." International retail sales, which the company has put much of its resources into in 2013, are expected to be up 40 percent compared with last year, Mulberry says.
Despite the projected international growth, the fact remains: Mulberry's sales are lagging. And this isn't the first time the company has reported it: Mulberry issued profit warnings earlier last year and late in 2012, as well. But why?
The problem may be in the pricing. Since Guillon joined the company from Hermes in 2012, he's focused on taking Mulberry more upmarket, resulting in more expensive handbags. Now, Mulberry is selling bags in the $8,000 range, which doesn't quite hit the all-important "hyper luxury" category, but still might be too expensive for the status that a Mulberry proffers its wearer.
The disappointing news comes amid Mulberry's search for a new creative director. Emma Hill left earlier this year after six years with the company. Her departure from (and alleged disagreements with) the company could have contributed to the lagging interest in Mulberry bags among shoppers this year. She's known for attracting celebrity clientele and it has been a while since we've seen any of those British It girls toting around a Mulberry bag. Plus, Mulberry's seasonal handbag releases have yet to come close to matching the buzz or success of the Alexa, which hit shelves in 2010.
Mulberry could definitely use the reinvigoration that typically comes from the hiring of a new creative director. And if expansion in the U.S. is of interest, perhaps Mulberry could stand to name a handbag after an American celebrity with a bit more staying power than Lana Del Rey. Though, if we had to put our money on the name of the next celeb-nammed purse, we'd bet on The Cara.