Mulberry
Mulberry spent a decade trying to become a global luxury powerhouse. Now it's closing overseas stores and putting its bags back into John Lewis. Sales just jumped 18%.
ALL BREAKDOWNSTHE BREAKDOWN
10/27/20266 min read
Mulberry spent a decade trying to become a global luxury powerhouse.
Now it's closing overseas stores and putting its bags back into John Lewis.
Sales just jumped 18%.
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THE SETUP
In the late 2000s Mulberry was “THE” British handbag. The Bayswater was everywhere. The Alexa was named after Alexa Chung once she’d been photographed carrying an old Mulberry briefcase. Both came out of a leather business in Somerset, which in 2012 made a £35m operating profit on £168.5m of sales.
Then it got ambitious. In 2015 Mulberry set out to take on the global luxury houses. It set up its own businesses from Sweden to Australia and built a company infrastructure for customer base that wasn’t there.
When demand fell, it reached for the discount rail. Most fashion brands do. For Mulberry it hurt more, because it makes its own bags.
By FY2026 sales were down to £125.5m and the £35m profit had become a £4.3m loss.
The odd part is the bags. After paying for the leather and the labour, Mulberry kept 72p from every pound, more than the 66p it kept in 2012. Pound for pound, the bags were earning more than at the peak. The company around them was eating it.
Shop rent, head office, software, a subsidiary in Sweden. In 2012 all of that took about 45p of every pound. By FY2026 it took 77p.
In September 2024 Mulberry hired Andrea Baldo, who had spent six years running Danish label Ganni. His plan is the 2015 plan in reverse: fewer shops of its own and more space in other people’s. In October Mulberry said first half sales were up 18%, with fewer products on promotion.
It proves people want the bags again. Now Mulberry has to avoid making the same mistake twice.
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THE PLAYBOOK
1. Build abroad before the customers arrive
Thierry Andretta became chief executive in 2015 with a sensible-sounding plan to turn Mulberry into a global luxury brand. Its own stores and subsidiaries abroad would give it control of pricing and less dependence on the UK.
So, Mulberry set up its own operations in Sweden and Australia and expanded across Asia Pacific. It also spent heavily on technology to join up its stores and website.
Every one of those decisions added a fixed cost on day one. The sales to pay for them were supposed to follow.
They didn’t. In FY2023 operating costs rose 26%. Sales were £159m and the business barely broke even.
Then luxury demand fell in the UK and China. The costs stayed. In FY2024 Mulberry lost £34m before tax, including £8.6m written off on its stores. A software project later produced a £2.6m write-off of its own. That is a lot of handbags.
In Baldo’s first full year, average factory staff in Somerset fell from 303 to 209 as the business shrank to fit its sales.
Sweden and Australia were a gamble. Chilcompton and Bridgwater needed to cover the costs.
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2. Discount the bags
When sales stopped covering costs, Mulberry did what most fashion brands do and put the bags on sale.
The difference is that Mulberry makes its own. About half its leather bags come out of two Somerset factories, The Rookery in Chilcompton and The Willows in Bridgwater. The buildings and the people in them cost the same whether the factory is busy or quiet.
A factory works like a minibus. The fuel and the driver cost the same with three passengers or sixteen. Fill the seats and every ticket is cheap to run. Run it half empty and every ticket costs more.
Regular sales empty the seats. Say a customer sees a £1,200 bag drop to £900 every few months (an illustration, not Mulberry’s prices). They stop paying £1,200 and wait. Between sales, orders dry up and the factories run half empty. When the sale comes, the bags go out cheap. Each one costs more to make and sells for less.
Baldo stopped the sales and took the pain. Sales fell 4% in the first half of FY2026, but gross profit held flat because each bag kept more of its price.
Then the customers came back at full price. The factories got busier and by Mulberry’s own account, each bag got cheaper to make. Over the full year gross profit went from 67p to 72p in the pound. Sales rose £5.1m and gross profit rose £9.8m.
It helped that there was something worth paying full price for. Baldo went back to the archive, bringing back the Roxanne and adding to the Bayswater family. More than half of UK sales came from returning customers.
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Takeaway: In a business that owns its factories, a discount costs you twice. You lose money on the price today and pay more to make the next bag. Before approving a promotion, ask what it does to the factory as well as to sales.
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3. Someone else's shop floor
Mulberry still had too many costs that did not move when sales did. So Baldo started swapping them for costs that rise and fall with sales. In FY2026 he closed one UK store and eight overseas, mostly loss-making sites in Asia. The future rent Mulberry owes on its shops fell from £39.9m to £30.4m.
At the same time Mulberry went back into department stores: John Lewis, Liberty, Harvey Nichols and Nordstrom in the US. Wholesale sales rose 52% in the first half of this financial year.
Wholesale pays Mulberry less per bag than its own shop would. In return the partner pays the rent and the staff. If a Nordstrom concession has a bad quarter, Mulberry sells fewer bags. If a Mulberry store has a bad quarter, Mulberry still pays the operating costs.
Asia shows the trade-off. Mulberry closed severl of its loss-making shops there and first half sales in the region still rose 5%. The shops that stayed open sold 24% more than they did a year earlier. Fewer shops, each doing far more.
Wholesale only works on two conditions. The margin handed to the partner has to be smaller than the rent and wages saved and Mulberry has to control how much stock goes in and when it gets marked down.
Department stores run sales events. If partners can send unsold bags back or demand discount support, the discounting Baldo removed from his own shops comes back through the partner.
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Takeaway: Before moving to wholesale, compare the margin you give away with the rent and wages you stop paying, then check who decides markdowns. If the partner holds that decision, the old problem has only changed hands.
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ONE MORE THING
Mulberry’s founder lost his company for £7.6m.
Roger Saul started Mulberry in 1971 with £500 and a pile of leather offcuts, making belts. In 2000 Singaporean investors Christina Ong and Ong Beng Seng put about £7.6m in through their company Challice. Within three years Saul was off the board and Challice was in charge. They still are.
In October 2024 Mike Ashley’s Frasers Group already owned 37% of Mulberry and it offered 150p a share, about £111m for the whole business. Challice said no. Over the next year, along with Fraser’s, they put more than £20m in to keep the turnaround going.
Frasers lost the bid but didn’t walk away. Nine months later it lent Mulberry £7.9m, on terms that let it turn the loan into shares at 150p, the price Challice had refused. Until then it earns 7% a year.
If anyone else makes a takeover bid, the loan turns into shares automatically. Frasers also got a seat on the board. In October the shares were trading around 235p.
So Challice runs Mulberry and Ashley has a way in at a price that already looks cheap.
Both need Baldo’s plan to work. He wants £200m of sales with 15p of every pound kept as operating profit. That works if sales grow before costs do. Last time it went the other way.
The place to watch is the warehouse. Mulberry is holding 48% more stock than a year ago to rebuild supply of its core bags and it has hired designer Christopher Kane to create a clothing line.
A black Bayswater sitting in a warehouse will sell eventually. Unsold seasonal stock becomes next year’s discount.
The half year results on 19 November will show if the plan is working.
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THE PAPER TRAIL
European CEO: Roger Saul on building and losing Mulberry
6 minute read
The founder’s account of bringing in an investor, losing control and starting again.
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British Vogue: The return of the Alexa, 2020
2 minute read
How Alexa Chung carrying an old briefcase inspired a bag with worldwide waiting lists.
https://www.vogue.co.uk/fashion/article/mulberry-alexa-bag
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The Independent: “Mulberry: To hell in a handbag”, 2014
3 minute read
An account of Mulberry trying to become Hermès and alienating the customers who loved it.
https://www.independent.co.uk/life-style/fashion/news/mulberry-to-hell-in-a-handbag-9271502.html
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The Drum: The Christmas advert that replaced baby Jesus with a handbag, 2015
1 minute read
Mulberry put a red handbag at the centre of a Nativity scene, attracted 42 complaints and escaped a ban. Luxury worship, taken literally.
https://www.thedrum.com/news/mulberry-christmas-miracle-ad-cleared-blasphemy-asa
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