Mulberry Repositioning Pays Off

Mulberry has just announced the evolution of its sales in the last 10 weeks with a positive surprise for the markets. According to the statement, sales increased 17% in the period ended June 6. It’s the best pace in more than four years, which has caused a warm welcome from investors, who have awarded the stock with an increase of 12% so far this year.

It is undeniable that the company is improving very fast. The solution has been easier than expected: to abandon an obvious wrong strategy. The former CEO, Bruno Guillon, thought the future of the company going to upgrade the company to a more premium market, reducing supply and raising prices.

This movement was a disaster, because clients were not willing to pay similar prices to those paid by «more glamorous products» as Gucci or Louis Vuitton. The result was a collapse of the business and its market value (45% drop in three years). In fact, despite the sales rebound. Its profit still not seems so good: full-year pre-tax profit fell by 74% to 4.5 million pounds.

Just one year ago the company fired Guillon and hired Thierry Andretta. After analyzing the performance of the business, he decided to go back to the starting point and reposition their products where they have always been, reducing prices to levels between 500 and 1,000 pounds and introducing new products at the same price level, such as the new product lines Cara and Tessie.

It has also strengthened the online business, allowing clients to make lnternet orders and collect them in the stores. The result has been very positive so far. Last year, its first half results showed a drop in sales by 9%, the following six months showed and increase of 9% and now we are talking about figures close to 20%. In addition, the company has decided to maintain its dividend despite the profit decline, in a clear message to the market that its expects things to improve in the future.