Mulberry is consulting on cutting about a quarter of jobs in its workforce – in the region of 350 jobs – as it recovers from the impact of Covid-19. The luxury leather company says most of its shops are still closed following the coronavirus pandemic and that while digital sales have been good throughout the outbreak they do not make up for the lack of demand in its stores. Even once shops reopen – starting next week in the UK – it expects low tourist and shopper numbers and the introduction of social distancing to affect sales that are in turn expected to recover gradually over the medium-term. In the light of this change to its trading prospects, Mulberry says that it must manage its operations and costs to make sure it has the right size and structure to reflect changing market conditions – and it is consulting on plans to reduce employee numbers by about a quarter across its global business.
Mulberry chief executive Thierry Andretta said: “In spite of the good performance of our sector-leading digital and omichannel platform and our global network of digital concessions, the shutting of all our physical stores has had, and will continue to have, a marked effect on our business.
“Launching a consultation process has been an incredibly difficult decision for us to make but it is necessary for us to respond to these challenging market conditions, protect the maximum number of jobs possible and safeguard the future of the business. We remain confident in the strength of the Mulberry brand ad our strategy over the long-term.”
Mulberry has already reopened its shops in China, South Korea and, more recently, in Europe and Canada. It operates more than 100 shops around the world, including 55 in the UK, as well as concessions in department stores. It employs about 1,400 people around the world, including some 1,140 in the UK.
The brand says that it has net cash on hand and has not yet drawn on its borrowing facilities.
The news follows swiftly on Friday’s news that the UK arms of Victoria’s Secret is going into administration, putting 800 jobs and 25 stores at risk, although customers will continue to be able to shop online. At the time, Rob Harding of Deloitte said redundancies would not be made immediately as it tried to find a buyer for the chain. He said this was a “further example of the impact the Covid-19 pandemic is having on the entire retail industry”. He added: “The effect of the lockdowns, combined with broader challenges facing bricks and mortar retailers, has resulted in a funding requirement for this business, resulting in today’s administration.”
Commenting on today’s news, Nigel Frith, senior market analyst at asktraders.com, said: “Even more bad news for retailers as the luxury brands are also struggling to fight through the current pandemic. It seems that these cuts are Mulberry’s only option, and 25% of its workforce is still a lot of employees. When nonessential stores do re-open on June 15th, social distancing measures will still continue to hurt sales for a long time, but brands across the retail sector will have to adapt effectively in order to get the sales they need to stay afloat.
“Even though people are saving more money, priorities have changed and evidently consumers are not wanting luxury physical items. It’s a sad time for Mulberry, but like other brands such as Victoria’s Secret – they do have brand competition as well as trying to fight through a global virus.”
Mulberry and Victoria’s Secret are both ranked Top250 in RXUK Top500 research.
Image courtesy of Mulberry