Asia is still killing off Mulberry’s sales. The luxury handbag maker is staging a turnaround but it’s not good enough.
So, Mulberry is hoping to “emphasise its Britishness” to get people buying the brand again.
The last 12 months have been pretty disastrous — it has been hit by a string of profit warnings and pre-tax profit came in at a measly £100,000 ($151,700).
This is definitely an improvement from the loss of £1.1 million ($1.67 million) this time last year. But investors aren’t happy with the slight uptick in sales — shares are down by 1.5% this morning.
Mulberry, like many other luxury goods makers, is suffering from a recent crackdown on luxury “gifting” and general outward displays of wealth by Chinese President Xi Jinping. While luxury retail had previously benefited from a boom in luxury buying power in Asia over the last decade, it is now the source of pain in revenue and profit growth.
For example, Mulberry has 57 partner stores in Asia and Europe but wholesale sales declined by 11% to £17.4 million, “reflecting conservative ordering by our Asian partners as well as our own efforts to increase control over distribution to independent retailers.”
Now the brand is pinning all its hopes on its new creative director Johnny Coca to get people buying the brand again.
“We expect the sales trend to continue for the short term as our partners await the arrival of the new collections from Johnny Coca and we continue to optimise our network,” said the group in its statement.
Furthermore, the new CEO Thierry Andretta, who took over from Bruno Guillon, is hoping that by emphasising Mulberry’s British roots, it may get more people buying its bags once more:
“Our strategy is beginning to deliver tangible results in line with our expectations. We look forward to Johnny Coca’s first Mulberry collection which will emphasise our Britishness and our heritage in leather, whilst delivering great quality within our targeted price range.
We remain committed to our UK manufacturing base, which produces c. 50% of our handbags. We are excited about the future and look forward to the Mulberry brand fulfilling its potential both in the UK and internationally.”
Over the last quarter other luxury brands have warned of the dire situation in Asia.
Burberry warned of the slowdown in Asia as recently in October, sending its share price tanking. China is a huge market for Burberry, which has benefited from a boom in luxury buying power in Asia over the last decade.
Here is what other luxury goods makers are reporting and how China in particular is having a severe negative effect on the industry as a whole.
- Remy Cointreau disclosed that sales declined by 9%, after taking a hit in China.
- Diageo, which makes Smirnoff and Johnnie Walker, took a £264 million ($411.5 million) sales hit in China, blaming the crackdown for a collapse in its version of Chinese white spirit baijiu.
- Earlier this year Prada blamed the crackdown for its first fall in profits in four years, which dropped by a whopping 28%.
- Luxury group LVMH, which owns Hennessy cognac, revealed a fall in spirit sales in the first quarter because of China.
- The luxury car market has taken a hit.
- And exports of Swiss watches to China have also collapsed.
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