COVID-19 not the only Guilty Party?
Many luxury fashion brands are in doubt over what the future will hold as they linger in the aftermath of the COVID-19 lockdown. Decreasing profits – or in many cases increasing losses have been blamed on temporary store closures and lost footfall and sales due to inaccessibility of brick and mortar outlets. But if COVID-19 the only offender? We think not. Many labels, such as DVF, were in troubled waters before the pandemic. Another is Mulberry, which many think have been on a downward spiral since for the last eight years.
Executive Salary – Share Price Connection
Many institutional investors, those dealing in pension funds, hedge funds, insurance companies and more, support management remuneration that is linked to company performance and therefore aligned with the shareholders. In 2012, Mulberry’s share price was at an all-time high of £23.90. The sad news is that in June 2020, it had plummeted to an unimpressive £2.15 price per share.
The Mulberry Chairman, Godfrey Davis, who joined the brand 33 years ago as Finance Director certainly has skin in the game. In 2012 he owned 689,000 shares and by 8 April 2020, his shareholding had increased to 718,000. Davis has suffered along with all the other Mulberry shareholders and his potential loss is £15 million. In contrast, the CEO Thierry Andretta who joined Mulberry in 2014, owns a meagre 3,000 shares which are worth less than £7,000. Compared to Davis, Andretta has very little skin in the game. Moreover, this is not a great display of confidence in Mulberry’s future potential, particularly as the CEO earned £983,000 last year.
Profit and Loss Problems
Mulberry’s revenue for the 12 months to 31 March 2019 was £166 million, down from £169 million in 2018. In 2019, the brand declared a pre-tax loss of £5 million compared to a pre-tax profit of £6.9 million the previous year. Mulberry’s interim report for the 26 weeks to 28 September 2019 showed losses before taxation rising from £8.2 million to £10.9 million.
Johnny Coco Leaves and Redundancies
On 31 March 2020, British luxury brand Mulberry lost its Creative Director of 5 years, Johnny Coco, who joined Louis Vuitton. Two months later, on 8 June 2020, it announced it would be cutting its global workforce of about 1,500 by about 25% to reduce operating costs. COVID-19 was mentioned in the press release but, considering the brand’s woeful financial state of play, drastic action was probably needed long before the pandemic.
