Mulberry entry-level handbags will have retail prices lowered by around £100 from June onwards, as the interim executive chairman looks to return the business to growth.
Godfrey Davis, who stepped in when Bruno Guillon announced his departure three weeks ago, told Drapers he had immediately conducted a “lock, stock and barrel” review.
As a result, some of the ranges landing in June for autumn 14 will have prices lowered, and more generally price increases that had been planned for November will no longer take place.
Currently the entry-level range retails for £495 to £695.
The luxury accessories brand this morning (Thursday April 17) warned that the measures would have a “material adverse impact on profit”. Analysts at Barclays said they expected this to hit pre-tax profits by 42% in the current financial year. Mulberry is now expected to record profits of £11m instead of £19m for the year to March 31, 2015.
Davis told Drapers: “In the short term, a year or maybe two, there will be an impact on margins, but if the actions we are taking return the business to growth, it will counter the price shift.
“We are not expecting major price increases in the cost of materials, so as we return to growth profitability will increase again [because of improved economies of scale].”
Davis said he expected the business to grow at a “robust rate” as a result, noting that the most significant drop off in sales had come at the lower end of the market.
This morning Mulberry also issued a profit warning for the financial year ending March 31, 2014, as a result of a £2.7m impairment charge for two properties in the US, closing one in New Jersey and relocating a New York store.
Barclays noted that the drop in anticipated profits – from £19m to £14m – would also include “the former chief executive’s undisclosed departure package as well as the shortfall in profits”.