British luxury brand Mulberry reported a 9% drop in total revenue to £148.7 million ($230.2 million) for the year ending March 31, from £163.5 million ($253.1 million) in the previous period.
This may seem pretty diabolical for a luxury brand right now but actually the group identified that there was a problem with revenue during 2014 and made a massive change to its products to boost retail sales - it made sure all its handbags fell within a specific price range.
"I am pleased that the strategy we approved as a Board last year is beginning to bear fruit," said Thierry Andretta, CEO of Mulberry in a statement."We are committed to strengthening our position in the UK whilst continuing to pursue our international growth strategy. We are focused upon translating the luxury values and Britishness of the Mulberry brand to a global audience."
Basically, Mulberry found that by making sure its handbags fell within a £500-£1,000 ($775-$1548) price range, more people would buy them. Prior to the new strategy, lots of the company's bags sold for over £1,100. The proportion of bags in the new lower price range rose from 45% in the Spring/Summer 2014 collection to 66% of its Spring/Summer 2015 range.
The changes seem to be working — retail sales rose by 1% in £109.9 million ($170 million) for the year. In the first half of the year, retail sales fell by 9% but then picked up by 9% in the second half due to the pricing strategy.
This is a big deal because, as expected by the company, wholesale sales were down 29% to £38.8 million ($60 million), so it needs to boost sales from retail — the people going into shops and buying products off the shelves. And getting it right on handbags is a big part of that as leather goods account for 90% of Mulberry's revenue.
"The recent improvement in sales momentum suggests that this is a successful strategy," said the group.
"We have seen a positive uplift in sales since November as a result of the actions we took at the beginning of the year," said Godfrey Davis, Chairman of Mulberry in a statement. "We have focused on creating desirable new products across the entire Mulberry range whilst continuing to invest for the longer term. Our initiatives to re-engage with our customers have delivered promising results."
Mulberry are pretty happy with the results from the new pricing strategy and confirmed that they are going to apply a "critical" price range to ALL product categories, "aligning the price point of shoes and ready-to-wear collections with bags in order to make those collections more relevant to the Group's core customers."