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Mulberry chief executive steps down in wake of profits warning Mulberry chief executive steps down in wake of profits warning
(about 4 hours later)
The Mulberry chief executive, Bruno Guillon, has fallen on his sword (or perhaps his handbag) and abruptly left the company after a disastrous move to raise prices and take the luxury handbag brand more upmarket alienated its core British clientele. It was handbags at dawn yesterday and the bloody loser was Mulberry boss Bruno Guillon who paid with his job for meddling with middle England's favourite handbag-maker.
His departure comes less than two months after the British label, whose soft leather bags have been seen dangling off the arms of Victoria Beckham and the Duchess of Cambridge, issued a profits warning – the third in the space of 18 months. The Somerset firm announced Guillon's departure with "immediate effect" after the firm's attempt to chase the spending power of high end shoppers on New York's Fifth Avenue and Hong Kong's Causeway Bay alienated the John Lewis crowd back home – who were its most loyal shoppers, even if they had to save up for months to buy one of its soft leather bags.
In a brief statement, Mulberry said Guillon had stepped down with immediate effect after a turbulent two years at the helm during which the company lost two-thirds of its market value. He is understood to be getting a payoff. In a terse statement to the stock exchange, the company's chairman Godfrey Davis said he was returning to lead the business and thanked the Frenchman for his "hard work".
Godfrey Davis, the chairman and Guillon's predecessor who masterminded Mulberry's rapid growth between 2002 and 2012, will run the company as executive chairman until a successor is found. That "hard work" included engineering a slump in sales and profits that has seen the company's stock market value crash from £1.5bn to just £400m.
His focus is on finding a new CEO as well as a new creative director, following the shock departure of the highly regarded Emma Hill last summer after six years. She was credited with transforming Mulberry from a traditional British briefcase and wallet maker into an international fashion label favoured by celebrities. Mulberry is also indebted to Kate Moss who first stepped out with one of its Bayswater bags a decade ago. His two year reign also saw the departure of Emma Hill, the creative genius who was credited with bringing about the brand's renaissance in the first place, with bestselling designs such as the Alexa – a satchel named after presenter Alexa Chung – and the Del Rey, dedicated to singer Lana Del Rey.
Its best-known product is the Alexa satchel, named after the model and TV presenter Alexa Chung. It made a splash when it debuted in 2009, priced at £750, and sold out within three weeks. The price has since risen to £1,100, with a more expensive version selling for £4,500. It has been reported that Hill, who had previously worked for Burberry and Marc Jacobs, did not agree with Mulberry's push upmarket and her important position remains vacant.
Under the tenure of Davis – who once said that it was a "grave mistake for luxury brands to think all their customers are super-rich" – Mulberry bags could be had for £500. Davis politely insisted Guillon, who joined from Hermès in 2012, had "improved the quality" of the Mulberry offering and increased its appeal in overseas markets. "I am confident that Mulberry has the heritage, brand appeal and products to build on what has been achieved," he said.
Since joining the company in 2012 from Hermès, Guillon has raised prices in an attempt to turn the "affordable luxury" label into a full-scale designer brand. That strategy backfired and Mulberry's shares nearly halved from £13 over the last year. On Thursday morning, they rose 5% to £6.69. Over Christmas Mulberry was forced to slash its prices. Two years ago, when Davis was still running Mulberry, he told the Guardian it was a "grave mistake for luxury brands to think all their customers are super-rich". He drilled into staff the importance of being friendly to customers and the firm's internal mantra "we don't believe in bad manners, fashion egos or size zeros"was an antidote to austere Bond Street boutiques.
Guillon was defiant in an interview with the Sunday Times last year, insisting that a short period of pain was necessary to reposition the Mulberry brand. He told the paper: "Fast growth is very nice to have but also dangerous. You can't do something with strong foundations from one day to another." Back then, Mulberry's classic Bayswater bag, costing £500, was within touching distance for many British women. Today, after Guillon introduced more exotic finishes such as ostrich skin, they start at around £900 .Its smallest bag – a clutch style wallet measuring 11cm by 20cm – costs £495, while keyrings run to £100.
Mulberry has just begun a collaboration with model-of-the-moment Cara Delevingne as it battles to restore its fortunes. She unveiled a collection of Mulberry bags during London fashion week a month ago, including one inspired by her lion tattoo. Having watched Burberry's success over the last decade,Guillion was eyeing the $390bn global market for designer clothes and accessories, where well-heeled shoppers do not bat an eyelid at a four- or five-figure price tag. Recent initiatives include a collaboration with model Cara Delevingne unveiled at London fashion week and included a bag inspired by her lion tattoo.
Rahul Sharma, the managing director of Neev Capital in London, told Bloomberg that Guillon "was trying to do an Hermès and upscale the brand. Some brands have the DNA to do that and some don't. That's where he struggled." But with more than 60% of Mulberry's sales rung up in the UK, its traditional shoppers were priced out of the market and have since defected to fast growing brands such as Michael Kors and Coach whose arm candy are priced at a fraction of their more illustrious rivals.
Davis said: "I, along with the board, would like to thank Bruno for his hard work over the past two years. When Guillon took over in 2012 Mulberry could do no wrong for shoppers or investors. It was the sleeper success of the luxury goods sector, having quietly metamorphosed from a staid brand, adopted by the green welly brigade in the 1980s, into a fun and unpredictable label c capable of conjuring up "it-bags" that "it-girls" such as Chung were happy to sling over their shoulders. Like many brands it owes a debt to Kate Moss, a friend of Hill's, who lit a fuse in the fashion press when she stepped out with a Bayswater in the crook of her arm a decade ago. Moss's patronage proved a turning point for the brand, putting it on the radar of Grazia readers.
"He has helped improve the quality of the Mulberry offering and enabled the company to increase its international appeal and grown international retail sales. I am confident that Mulberry has the heritage, brand appeal and products to build on what has been achieved." Lorna Hall, head of retail at trend consultancy WGSN, said it can be very hard for fashion brands to move upmarket and even more so in the glare of the stock market where executives are forced to publish regular sales updates. "When you make this kind of shift there is always a danger of alienating your existing customers," she said.
Davis rescued the brand before, taking the helm in 2002 after years of losses as part of a boardroom coup instigated by Mulberry's biggest shareholder, the Singaporean billionaire Christina Ong. Mulberry's founder, Roger Saul, was ousted at the time. "Mulberry has made a big shift in its prices. It had customers who were willing to pay £500 but they won't go above that. She was Mulberry shopper - not a Louis Vuitton or a Chanel shopper."
Mulberry generates more than 60% of its sales in Britain but is betting on overseas expansion to countries including China and the US. Davis has rescued the brand before. He took charge in 2002, when after years of losses, Mulberry's biggest shareholder, the Singaporean billionaire Christina Ong ousted the founder Roger Saul in a bloody boardroom coup. History repeated itself yesterday but there were no tears, from investors anyway, with the shares closing the day up more than 5%.
In stark contrast to Mulberry, Guillon's previous employer, Hermès – known for its Kelly and Birkin leather handbags which cost €7,000-€30,000 (£5,800-£25,000) – lifted its dividend on Thursday after posting a 9% rise in 2013 profits to €1.2bn, although it admitted that profits will be dented by the weak yen this year.