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March 20, 2014 8:55 am
Eyebrows were raised at last month’s London Fashion Week, when Cara Delevingne strutted down the catwalk for Burberry.
Typically, there would be nothing unusual about a model of the moment appearing at Fashion Week’s most high-profile show. But just a day before, rival Mulberry had announced a collaboration with Ms Delevingne, designed to revive its flagging handbag sales.
The episode – noted by fashion insiders – was symptomatic of the mis-steps that have beset Mulberry over the past two years. On Thursday Bruno Guillon, the former top Hermès manager who became chief executive two years ago, paid the price and left the company with immediate effect.
Mulberry has suffered from strategic miscalculations, prompting three profit warnings and a collapse in the share price. It also parted company with its highly regarded creative director Emma Hill last June.
But the biggest mistake, analysts say, was taking what was previously an affordable luxury brand too far upmarket. Some analysts believe this strategy was in train before Mr Guillon’s arrival.
“You have to be true to your DNA,” says Luca Solca, head of global luxury at Exane BNP Paribas. “This was far too much of a stretch.”
Mr Guillon was on a rolling 12-month contract and was paid a basic salary of £570,000 last year.
Godfrey Davis, the chairman who took Mulberry from a dowdy leather goods firm to a hip handbag maker, will take up the chief executive’s role on an interim basis.
While Mulberry has suffered a tumultuous two years, luxury watchers believe it can be turned around – and the company’s shares closed 5.2 per cent higher on Thursday at 670p.
“It is a brand that people love in this country,” says Moira Benigson, managing partner at MBS Group, the executive search firm.
Mr Solca believes that by reversing the move upmarket and going back to Mulberry’s historic affordable “sweet spot”, it could have a much brighter future.
“If they were positioned in the aspirational or accessible market, where peers are having tremendous success, and where they were also quite successful before, this would be very appropriate, and they could be quite an interesting brand,” he says.
Furthermore, he says that luxury groups, such as Louis Vuitton, Gucci and Prada are all moving more upmarket, leaving a gap for Mulberry to exploit.
But, experts say, for this strategy to work, the company must rediscover its roots.
“Mulberry needs to return to what was the core of the brand,” says Kate Walsh, a headhunter at Ridgeway Partners. “That is beautiful, well-designed, well-priced products, British, but not twee, and with an edginess about them.”
Neil Saunders, managing director of Conlumino, the retail research group, says Mulberry needs to ditch some of the more “tacky” elements of the brand, such as the design of some new stores.
“It used to be quintessentially English, very understated luxury,” he says. “It has become a bit big and brash.”
The sort of person capable of steering Mulberry in the right direction could come from a rival brand operating in the affordable luxury market, such as Michael Kors, or Marc by Marc Jacobs. Mr Solca says Kate Spade, Tory Burch and Coach could also make good hunting grounds.
Ms Benigson says Mulberry should look for a British luxury goods executive, who understands the heritage of brands, perhaps someone within Burberry.
Others suggest being British is not crucial. What is imperative is someone who is sensitive to the brand and can recruit a top creative director. Improving the clothing line, and perhaps taking Mulberry into areas such as cosmetics – a key focus for luxury groups at the moment – would also be useful.
Samuel Johar, chairman of headhunter Buchanan Harvey, says the new chief executive of Mulberry will also need to restore investors’ faith in the company after the series of profit warnings. This may involve bolstering top management more broadly if skills in setting expectations cannot be combined with creative talent.
Dealing with the City will be crucial if, as some analysts believe, Mulberry could be in the sights of a private equity firm or a big luxury goods group.
“I think it would be appealing to a lot of groups that find themselves now positioned in the high end, and have nothing to compete in the lower end,” says Mr Solca. “Whether the shareholders would sell is a different matter.”
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