Mulberry Group PLC

Kilver Court
Shepton Mallet BA4 5NF
United Kingdom
Telephone: 44 17 4934 0500
Fax: 44 1749 345 532
Web site: http://www.mulberry.com

Public Company
Incorporated: 1971
Employees: 464
Sales: $56.6 million (2004)
Stock Exchanges: London
Ticker Symbol: MUL
NAIC: 316993 Personal Leather Goods (Except Women's Handbag and Purse) Manufacturing; 448320 Luggage and Leather Goods Stores; 448150 Clothing Accessories Stores; 316992 Women's Handbag and Purse Manufacturing; 316991 Luggage Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing

Mulberry Group PLC bases the high-end accessories and select men's and women's apparel that it designs, makes, and sells on English country style. Items are sold through about 13 company-owned stores, select department stores, and the Mulberry web site. The company is best known for its leather-bound Filofaxes, or datebooks, and handbags.

1971 to Late 1990s: The Company Grows
from Its Roots in Shepton Mallet

In 1971, Roger Saul decided to go into business using the £500 he had received as a 21st birthday present for capital. His father suggested he sell Christmas trees or donkeys. Instead, Saul, and his mother, Joan, founded a company making leather goods in their garage.

Although a quiet-spoken man, Saul was full of enthusiasm and it was this that became the driving force behind Mulberry. The company drew inspiration for its designs from what was quintessentially English as well as eccentric. "Mulberry whiffs of all sorts of things," as Saul explained in a 1993 Times article. "A certain integrity, a certain reserve, definitely a humourous eccentricity. Quality unquestionably, and perhaps even a little bit aristocratic. People expect that from an English branded product, but you must not be afraid to laugh at yourself."

The company set up headquarters in Shepton Mallet, Somerset, and pulled together a factory workforce of local residents. Other factories in nearby Chilcompton and Walton followed and Mulberry added to its collections of accessories and introduced ready-to-wear items. By the early 1990s, Mulberry was a known entity and in 1991, it added its "At Home" range of interior designs, the precursor of its Home Division. By 1992, the company was drawing in revenues of £50 million.

In 1996, Mulberry opened new stores in Heathrow Airport and Tokyo. These duty-free shops joined the company's other successful duty-free operations in Germany and Denmark. Mulberry also entered into an exclusive distribution agreement with Moonbat Company Limited, one of Japan's largest fashion accessory companies, to import Mulberry's full range of accessories and ready-to-wear products. In May, it sold shares on the Alternative Investment Market, a part of the London stock exchange reserved for newer companies. Sales in Mulberry's retail division climbed 26 percent in 1996, while sales in its home division rose 50 percent. The company as a whole enjoyed a profit of £1.7 million.

Based on the preceding year's strength, in 1997, Mulberry opened the Charlton House Hotel in its home town of Shepton Mallet, Somerset, to showcase the Mulberry Home Collection of interior items and introduce Mulberry to a wider audience. The Georgian-fronted Charlton House dated back to 1630 when merchant Roger Ames built it as a home for his bride. "Having created this environment, it is very important that the detail is right, that things are put together in our way, to emphasize that we could live here," Roger announced in the Times March 8, 1997 article. Each of the hotel's 16 bedrooms reflected a different aspect of Mulberry's interior collection; the moldings, pelmets, and Baroque plaster work throughout the building were a sign of Roger's passion for architectural salvage.

Also in 1997, Mulberry opened two new stores: one in Manchester, which became the company's flagship store for the north of England, and its first stand-alone Mulberry Home Store in London.

1998–2000: Rocky Times Following Asian Crisis

By 1998, however, Mulberry was feeling the effects of the 1997 Asian crisis. Sales growth had exceeded 25 percent for each of the previous two years. Now there was an increase in operating costs of nearly 15 percent. Company losses for the year totaled £1 million. Moonbat withdrew from its investment program, and Mulberry had to reorganize its Japanese operations, taking over control of its Tokyo stores.

Mulberry responded by strengthening its management team and laying off some of its 472 staff in 1998. Saul and his wife, Monty, and other directors took 12 percent pay cuts. In order to combat the impact of the strong pound, the company closed its handbag factory in Somerton, laying off 28 workers, and moved production of its leather goods overseas to Italy, Turkey, and Spain. Over the course of the year, the company issued four profit warnings, and late in the year, one of its directors left.

However, such was the demand for Mulberry's Bohemian take on classic English country style that the company continued to open new franchise shops worldwide, including new stores in Japan in 1998. Mulberry also targeted the Middle East for expansion, specifically Bahrain, Kuwait, and Lebanon. It opened a new Mulberry Home Store adjacent to its flagship store in Tokyo, which doubled its total sales area there. Elsewhere in the world, Mulberry continued selling well—in the United States, where only the Home Collection was available, in Europe, and in Dubai, which already had two stores.

In fact, to increase its penetration of the European market, in 1999 Mulberry struck a license and partnership agreement with Kravet, an American home furnishings company, to open a new Mulberry Home showroom in London's Chelsea Harbour. Kravet also agreed to distribute Mulberry fabric, wallpaper, and soft furnishings through its network in the United Kingdom, Europe, and North and South America. To aid in the marketing of its Home Collection, the company also published its first lifestyle book, Mulberry at Home. The company also entered into a second partnership with Toray Industries, the world's largest textile manufacturer, to develop the Mulberry brand in Japan. However, all this while, Mulberry continued to issue profit warnings, and dropping share prices and losses led to its decision to suspend dividend payments in 1999.

2000–04: A Return to Accessories and
Profitability Under New Management

Management at first made the decision to look to product innovation and the introduction of new product lines in 2000 to improve performance, then sold almost 42 percent of the family-controlled company to Ong Beng Seng and his wife Christina, Singaporean billionaires, who owned an investment vehicle called Challice. "We had to do a lot of soul-searching, but if we want to be truly successful it is increasingly difficult to stay independent," Saul confided in a 2000 Financial Times article. The Ongs ran Club 21 Armani in the United Kingdom and owned a string of other designer licenses throughout the U.S. and Asia. Christina Ong also owned a collection of fashionable shops, hotels, and restaurants, including London's Met Bar. The Ongs agreed to set up a joint venture to promote and sell Mulberry products in the United States.

The decision seemed a good one, counteracting the image that Mulberry had become stuck in a classic time warp and heralding a return to profitability in 2001 with revenues of $39.7 million. With British designer Scott Henshall taking over the design direction for Mulberry, the company stepped up its ready-to-wear line and launched a new menswear line in Italy. It also introduced a new high tech line, which included covers for laptops and portable CD players.

Then in 2002, the company returned to losses for the full year. It canceled plans for five outlets in the United States and closed stores in Brussels and Tokyo, although it went ahead with its scheduled expansion in Russia, the Netherlands, and Scandinavia. On the management front, it split the role of chairman from that of its chief executive officer and began a search for a new chief executive.

A row between Christina Ong and Saul followed, revolving around the agreement reached earlier that specified that Challice would open five stores in the United States in return for increasing its stake in Mulberry to 51 percent. With no American stores on the horizon, Saul demanded that Challice fulfill its commitment or sell its stake in the company. Ong wanted the Mulberry brand to be developed further before expanding overseas. The situation turned somewhat nasty when, following a clash with Saul, Christina Ong demanded a shareholders' extraordinary general meeting to vote on his removal.

In the end, Saul stepped down as chairman, while remaining president and non-executive director. Godfrey Davis became chairman and chief executive officer of Mulberry. Later the Ongs appointed Bernard Lam Kong Heng and Steven Grapstein to become non-executive directors. In 2003 Saul sold the last of his stake in the company to Insight Investment and stepped down from his role as president, with plans to open a spa next to Charlton House Hotel and launch a new range of bath and spa products. "It worried me enormously when it was just ourselves (his family) and the Ongs—it was a very locked-out situation," he said in a 2004 Financial Times article. "And now we have an investment structure that should help push [the company] forward. If the Ongs invest in Mulberry and put in good people, Mulberry will go far."

Company Perspectives:

Our vision is to be THE English lifestyle brand, competing globally with the best luxury brands using our strength in leather goods as our foundation.

However, Mulberry's losses continued as Challice continued to buy up more of the company. Under Davis, the company refocused on the accessories side of its business—selling leather accessories, handbags and belts—rather than clothes and instituted tighter management controls. Mulberry's strategy, according to Davis, would be "to simplify the business and make deals with experienced people who can develop a brand like Mulberry in their home markets." The Ongs and management also made plans to develop Mulberry's overseas markets via partnerships and to stem its losses by closing stores, including those in Paris and at some locations in the United Kingdom.

The company returned to profitability in 2003. In 2004, it entered into a partnership with Bergdorf Goodman and opened its first U.S. store. It also set plans to expand into Japan, Asia, and the United States in 2005. It began wholesale distribution to selected Japanese shops in 2005 by signing agreements with Mitsui & Co. and Sanki Shoji Co. When in 2005, Mulberry won the British Fashion Council award for accessory designer of the year for the first time in its history, the honor seemed to bode well for its future.

Principal Subsidiaries

Mulberry Oslo AS; Mulberry USA LLC; Mulberry Company (Design) Limited; Mulberry Company (Europe) Limited; Mulberry Company (Sales) Limited; Mulberry Company (France) SARL; Kilver Street Inc.; Mulberry (UK) Limited; Mulberry Company (Holdings) Limited; Mulberry Fashions Limited; Mulberry Leathers Limited; Mulberry (Shoes) Limited; Mulberry Company (Far East) Limited.

Principal Competitors

Burberry; Dooney and Burke; Etienne Aigner; Gucci; Hermes; Prada; kate spade; Kenneth Cole; LVMH; Pinault-Printemps-Redoute; Tandy Brands.

Key Dates:

1971:

Roger Saul and his mother found Mulberry.

1997:

Mulberry opens the Charlton House Hotel in its home town of Shepton Mallet.

1999:

Mulberry strikes a license and partnership agreement with Kravet and with Toray Industries in Japan.

2000:

Mulberry sells 42 percent of its business to Challice, owned by the Ongs.

2002:

Godfrey Davis becomes chairman and chief executive officer of Mulberry.

2003:

Ong Beng Seng and Christina Ong purchase the company through Challice; Saul leaves.

2004:

The company opens its first U.S. store.

2005:

Mulberry signs agreements with Mitsui and Co. and Sanki Shoji Co. for wholesale distribution to selected Japanese stores.

Further Reading

Buckley, Kevin, and Elizabeth Rigby, "Roger Saul Finds New Direction As He Cuts Ties with Mulberry," Financial Times, September 9, 2004, p. 23.

Buckley, Sophy, "Founder Reduces Mulberry Stake in Sale to Fidelity Household Goods," Financial Times, October 7, 2003, p. 28.

——, "Mulberry Seeks Expansion After Returning to Black," Financial Times, June 25, 2004, p. 25.

Cope, Nigel, "Mulberry Accuses Christina Ong of Veiled Attempt at Takeover," Independent, November 18, 2002, p. 17.

Dowdy, Clare, "Mulberry," Financial Times, October 2, 2001, p. 22.

Hollinger, Peggy, "UK: Deal with Ongs in the Bag for Mulberry," Financial Times, August 18, 2000, p. 21.

Morris, Belinda, "From Head-to-Toe and Floor-to-Ceiling, a Designer Country Hotel Is Born," Financial Times, March 8, 1997, p. 11.

Webb, Iain R., "Fruit of an English Country Garden," Times, September 27, 1993.

—Carrie Rothburd