Someday, business schools will do case studies on this. Perhaps one already is. But if ever there were an example of what not to do when it comes to running a luxury brand, it would probably involve Mulberry.
On Tuesday, the company delivered its third profit warning of the year, after similar warnings in October 2012 and March 2013, causing Mulberry shares to fall even further and luxury watchers to — well, freak out.
This was attributed at least in part to the timing of the statement, which came just as Burberry announced a 6.7 percent growth in sales even as it warned of a “more difficult” external environment. Together, the two brands had stirred all sorts of grandiose predictions, such as “Mulberry and Burberry hit by luxury slowdown as rich tourists stay away” (The Independent), “Dark clouds grow over luxury world” (WWD), and “Burberry and Mulberry add to luxury woes” (Financial Times).
But there is a danger in extrapolating too much.
The luxury market is unquestionably slowing, and the world is full of scary, bad stuff (the Islamic State, Ebola, etc.) that makes people less likely to go on indulgent jaunts full of expensive handbag purchases. At the same time, Mulberry’s woes are very brand-specific and, for anyone who pays attention, easy to identify. Here, for example, are some clear takeaways:
1. Be wary of the charge upmarket: It all began in June 2013 when Emma Hill, the Mulberry creative director, quit over “strategic differences” with Bruno Guillon, a former Hermès executive who had recently arrived as chief executive at Mulberry with the goal of taking the accessible-luxury brand upmarket. Consumers protested the rising prices and did not understand the rationale. Neither did analysts.
“They got stuck in the middle: too expensive for their former clients, not credible enough for the clients they aspired to,” said Luca Solca, the head of luxury goods analysis at Exane BNP Paribas. “What a pity Mulberry went on an overambitious journey to nowhere, while the accessible handbags market was booming.”
Now — as Exane BNP Paribas noted in a paper published this summer, whose title pretty much says it all: “Handbag Category Dynamics – Clouds on the Horizon” — the space is increasingly competitive and risky, with the “S word” (saturation) increasingly rearing its ugly head.
Another report, the “2014 Worldwide Markets Monitor,” issued Tuesday by Bain & Company and Altagamma, pointed out that shoes were now the top-performing fashion category, having slid into the below-$1,000 range vacated by accessible handbags.
2. There may be room for only one heritage brand at the top: Burberry’s success at painting itself as the ne plus ultra of Britishness, with its advertising campaigns full of Cute Young British Things, support of young British musicians and a starring role in London Fashion Week, created a raft of copycats, including DAKS, Aquascutum, Smythson and, yes, Mulberry, none of whom have come close to the same level of success at associating themselves with the cool of the country.
It strikes me that this may not be because they all fail at the strategy, but simply that there is only room for one in consumer minds, and Burberry was the first mover. I could be wrong, but it’s not an unimportant question. Which brings me to my last point:
3. Cara Delevingne is not enough. Ms. Hill has not been replaced, and there is clearly a creative and personal void at Mulberry. In an effort to give the brand some personality that would help it connect with consumers, Godfrey Davis, the former chairman who stepped into the chief executive role when Mr. Guillon departed, signed up the model/famous girl Cara Delevingne to design a bag range and model a new, back-to-accessibility line: the “Tessie,” in the campaign.
However, given the label’s lack of exclusivity with Ms. Delevingne, who is also appearing in numerous other ad campaigns including Chanel’s, Balmain’s and Burberry’s, her commitment to the bag is unconvincing. The truth is, a famous name is not the same as a design point of view, and consumers are smart enough to know the difference.
None of this obviates the larger question of luxury’s ills, but I do think we should pause before making Mulberry the poster child for the industry. It is, it seems to me — and apologies to Tolstoy — “unhappy in its own way.”