Mulberry boss Guillon quits after turbulent two years

LONDON Thu Mar 20, 2014 9:45am EDT

A flag flies above fashion retailer Mulberry's store on New Bond Street in London September 27, 2009. REUTERS/Luke MacGregor

A flag flies above fashion retailer Mulberry's store on New Bond Street in London September 27, 2009.

Credit: Reuters/Luke MacGregor

LONDON (Reuters) - Bruno Guillon has quit as chief executive of British luxury brand Mulberry, bringing an end to a two-year tenure marked by three profit warnings during an attempt to move upmarket that has failed to pay off.

Under Guillon, Mulberry hiked prices in an effort to become more exclusive and win back customers who were upgrading to pricier brands. But, like others in the market, it has been taken by surprise by the arrival of aspirational brands at the lower end of the luxury range, such as Michael Kors.

At the end of January, it was forced to cut profit forecasts for the third time in 18 months, after weak demand in South Korea and heavy discounting over Christmas in Britain which contributes 65 percent of sales.

"The board agreed that it was now time to part company," a source familiar with the situation told Reuters.

Mulberry, which makes Bayswater and Alexa handbags that sell for up to 4,500 pounds, said Frenchman Guillon would leave immediately, without saying if he would receive any payoff.

The warning wiped over 25 percent off Mulberry's shares in January, a loss from which they are yet to recover. Analysts see little short-term benefit from Mulberry's growth strategy that requires investment at a time of slowing sales.

The firm's efforts to become a global brand were also dealt a heavy blow last September when the highly-rated Emma Hill, creative director behind the Alexa and Del Rey bags, quit. Media reports suggested that Hill did not agree with the group's strategy and she is still to be replaced.

"Given all the profit warnings at Mulberry, it was debatable how long the core shareholders would keep faith with the embattled CEO and his strategy," analyst Nick Bubb said.

Mulberry said chairman Godfrey Davis, 64, would become executive chairman until a successor was found. During his 27 years at the group Davis has been finance chief and CEO.

Shares in the firm, which is 56 percent owned by Singapore billionaires Christina Ong and Ong Beng Seng, rose 1.3 percent to 644.5p at 1028 GMT.

GROWTH STRATEGY

Mulberry is not the only luxury firm to pursue more exclusive aspirations, larger rivals like Kering and LVMH, respective parents to Gucci and Louis Vuitton, have also been surprised by newcomers grabbing customers at the lower end of the market.

The likes of Michael Kors and Tory Burch, whose bags are priced at a fraction of their more illustrious rivals, are proving increasingly popular, especially with emerging market customers - the industry's main growth engine.

Guillon, who joined Mulberry from Birkin handbag maker Hermes and also worked at LVMH and Nina Ricci, oversaw an early rise in Mulberry's share price to 2,500 pence, lifting its stock market value to 1.5 billion pounds ($2.5 billion), before a string of profit warnings dragged that value down to less than 400 million today.

Guillon issued his first major warning in October 2012 when sales of its leather goods and accessories were hit by a slowdown in Asia. Five months later he issued a second warning as fewer tourists hit its home market and 10 months on he warned on profits again.

On the last occasion Guillon, who was paid a total of 807,000 pounds in 2013, told Reuters he'd stick to his strategy. A new collection of bags was unveiled in February in collaboration with British model Cara Delevingne.

Mulberry, which still sells 60 percent of its bags for under 1,000 pounds, has focused on improving product quality and has committed to making half of its handbags in England as it seeks a higher-end position for the brand.

In a statement, Davis said Guillon "has helped improve the quality of the Mulberry offering" and increased the firm's international appeal and sales overseas.

"I am confident that Mulberry has the heritage, brand appeal and products to build on what has been achieved," Davis said.

($1 = 0.6014 British Pounds)

(Editing by Elaine Hardcastle)