Struggling British handbag brand Mulberry is planning to cut around a quarter of its corporate roles, BoF has learned, as new chief executive Andrea Baldo seeks to return the brand to profitability after fending off a takeover bid from Mike Ashley’s Frasers Group.

The layoffs, announced during an internal town hall Thursday, will affect roughly 85 positions globally. The job cuts are focused on the company’s 350-person strong corporate team, and won’t affect its factories, retail stores or warehouses. They represent an initial step in a broader strategic reset that’s expected to be announced before the end of the year.

“The strategy for the business is clearly not delivering,” Baldo said in an emailed statement. “[It is] essential that our teams are set up for success and are able to act with agility and pace so that we can restore Mulberry to profitability.”

Since taking over from long-time CEO Thierry Andretta in early September, Baldo has faced a baptism of fire. While the former Ganni CEO was brought in to help turnaround the bag-maker’s flagging fortunes, within weeks of his appointment Frasers Group — Mulberry’s second-largest shareholder — made a play for the business.

The British group has emerged as an aggressive and ruthless activist force in UK retail since the pandemic. For instance, it put luxury e-commerce site Matchesfashion into administration earlier this year just months after acquiring it. Frasers made a series of offers for Mulberry over the last month, culminating in a bid earlier this week that valued the bag brand at £111 million ($144 million).

Mulberry’s board rejected the offer as “untenable,” pointing to a lack of support from its biggest shareholder, an investment vehicle owned by Singaporean billionaire Ong Beng Seng and his wife Christina. The firm’s holding of 56 percent means it can block any deal.

Frasers Group ultimately walked away from its takeover attempt on Wednesday, with a barbed parting shot: “Frasers continues to believe that market headwinds, and a clear lack of commercial plan, place the company in a very difficult financial position,” it said in a statement to investors. While the group said it remained a “long-term support” of the brand, it called on Mulberry to present a “credible plan in the near term” and requested a seat on the company’s board.

In his emailed statement, Baldo said the company has already taken “swift and decisive action to put the group on a firmer financial footing.” It moved to raise nearly £11 million through a share placing last month and has taken steps to reduce inventory and streamline its operating costs. Still, Baldo faces a long path ahead to reposition the brand for growth in a challenging market.

Mulberry enjoyed a buzzy millennial moment in the late 2000s and early twenty-teens, with hit bags like the slouchy Alexa satchel (named after British it-girl Alexa Chung) driving sales. But it’s spent the last decade in decline, struggling to remain relevant or compete on the global market, especially in the wake of Brexit. The company swung to an annual pre-tax loss of £34 million in its last fiscal year as a broader luxury downturn pressured sales. Its shares have fallen nearly 40 percent in the last 12 months.

Baldo, who presided over a period of international expansion and growth at contemporary Danish label Ganni is expected to focus on restoring brand heat, while leaning into Mulberry’s heritage and contemporary price point.

I’m really looking forward to BoF VOICES 2024 which takes place from November 12-14 in Oxfordshire, UK and will be livestreamed for our global BoF Professional community.

When we first created BoF VOICES in 2016, we aimed to disrupt the industry echo chamber and bring in valuable external perspectives to help form a more rounded perspective on how cultural, technological and economic forces are shaping fashion and the wider world.

The ninth edition of our annual gathering for big thinkers will take place at a pivotal moment for fashion and the wider world: in the wake of a critical US presidential election with serious implications for the global economy and geopolitics; a sector that continues to grapple with sluggish growth, climate change and shifting customer sentiment towards fashion; and rapid developments in artificial intelligence that is creating new paths to purchase and opportunities for operational efficiencies.

We will explore all of these topics — and more — at BoF VOICES 2024 with top business and creative leaders from fashion and luxury, as well as with leading thinkers, experts and entrepreneurs from the worlds of technology, economics, media, science and contemporary art and culture.

• Legendary editor Tina Brown will share her perspectives on the US election and the role of the media in the age of disinformation.
• Sven Smit, senior partner and chair of the McKinsey Global Institute, will explain how energy, geopolitics and shifting demographics have placed us on the cusp of a new era.
• Waorani leader and activist Nemonte Nenquimo, along with her partner and co-founder of Amazon Frontlines Mitch Anderson will join Bandana Tewari for a conversation on the impact of Amazon deforestation on the future of the planet.
• AI innovators Julie Bornstein, Tom Graham and Lawrence Lenihan will share the latest developments in artificial intelligence.
• Valentino’s creative director Alessandro Michele and chief executive Jacopo Venturini will share their vision for the creative revamp of the iconic Roman fashion brand amid a global luxury slowdown.
• Retailers Lauren Santo Domingo, co-founder of Moda Operandi and Michael Kliger, chief executive of Mytheresa will outline the future of luxury e-commerce as the industry consolidates and restructures its business model.
• Simon Porte Jacquemus will discuss the evolution of the Jacquemus brand as the company rolls out new retail stores in London and New York and plans for its next phase of growth and expansion.
• The CEOs of lingerie and loungewear brand Skims and sportswear company On will explain how they are successfully challenging longtime incumbents.

You can find our full list of speakers here.

I hope you will join our global livestream from November 12-14. Sign up here to reserve your space.

BoF VOICES 2024 is made possible in part by our partners Shop with Google, Amazon Fashion, McKinsey & Company, Getty Images, Soho House, Blacklane and Penfolds. If you are interested in learning about partnership opportunities, please contact us here.

Hobby Works President Michael Brey knows his customers are fed up with price increases, so he’s stocking up on less costly products he thinks people will actually go for. At his stores in Rockville and Laurel, Maryland, the pandemic-era days of passing on price hikes for items like train sets, remote-controlled cars and drones are over.

“We can’t raise our prices because consumers have kind of maxed out,” Brey said. “We are doubling down on these newer, smaller, entry-level items because they’re at a price point that we think will work for consumers in the current environment.”

Across the US, businesses like Brey’s are reporting a growing constraint on their ability to increase prices. Diminished pricing power should help slow inflation, which has already cooled substantially from the peaks registered two years ago. That could help give Federal Reserve officials comfort to continue cutting interest rates even when incoming inflation data, like the most recent report on consumer prices, is bumpy.

“That it is harder for businesses to pass on prices is an indication that the Fed’s tighter policy stance has been working in reducing inflation,” said Sarah House, senior economist at Wells Fargo. “This will be an important element for them to keep an eye on as they’re trying to finish that last mile of the inflation fight.”

After opting for an outsize half-point interest-rate cut to kick off their easing cycle in September, Fed officials received hotter-than-expected monthly inflation numbers. That and an acceleration in hiring in the latest monthly jobs report have led to some speculation that the US central bank could consider pausing rate cuts at coming meetings.

Policymakers have mostly downplayed such prospects, in part by citing what they’re hearing from business contacts about the outlook. Fed Governor Christopher Waller, speaking on Oct. 14 a few days after the latest report on consumer prices, called the numbers “disappointing.” But he added that reports from firms about waning pricing power are among the reasons he expects “increases will be modest going forward.”

Richmond Fed President Thomas Barkin and his San Francisco counterpart, Mary Daly, both made similar comments following the inflation report, citing anecdotes of increasingly cost-conscious consumers doing things like buying private-label products instead of branded ones.

“You see a lot more promotions. You see a lot more price reductions. You see a lot more channel-shifting, and that’s what’s bringing inflation down,” Barkin said at an Oct. 10 event. “That’s how it’s supposed to work, which is that high prices eventually fix high prices because people make other choices.”

As the economy reopened following the onset of the Covid-19 pandemic, businesses hiked prices as they faced strong consumer demand, widespread supply-chain disruptions and a generational opportunity to charge more. This year, however, the tide has turned.

Some $2.1 trillion in extra savings Americans accumulated between the pandemic’s onset and August 2021 were fully spent by March 2024, according to San Francisco Fed research. Meanwhile New York Fed data show a steady rise in the number of Americans behind on credit-card payments. And wage growth has cooled amid a slowdown in hiring, leaving shoppers choosier about what they buy and how much they pay for it.

In September, a net 25 percent of small businesses said they were planning to raise prices in the next three months, according to a National Federation of Independent Business survey. That puts the measure back in its pre-pandemic range after rising as high as 54 percent in late 2021.

Corporate earnings calls tell a similar story. Dirk Van de Put, chief executive officer of Oreo-maker Mondelez International, told analysts in September that while the company will raise some prices, it will do so “in steps so that we can see how the consumer reaction is” while “putting in place very close follow-up mechanisms.”

Narrowing profit margins also point to waning pricing power, according to Wells Fargo’s House. While economy-wide margins remain well above pre-pandemic levels, they’ve come down substantially in the retail and wholesale trade sectors after surging in 2021 and 2022.

At Hobby Works, Brey said customers in recent years were willing to take price increases “on the chin.” But now, they won’t pay more than what they perceive to be a reasonable price, causing sales declines in some of the stores’ departments. He’s managing that by stocking up on more affordable products, like a small remote-controlled car in the $150 to $200 range.

Some important indicators point to ongoing consumer resilience. Retail sales bested expectations in September, putting economic growth on track for its strongest quarter in a year, according to an Atlanta Fed model.

Fun Stuff

But persistent price increases for essentials like shelter, health care and insurance are limiting how much businesses can charge for discretionary categories, House said.

“We’re still looking at a pretty healthy consumer,” she said. “But right now, just given the inflation we’ve seen in those non-discretionary items, that’s leaving less money left over to go spend on the fun stuff.”

Results of a periodic Fed survey of regional business contacts published Wednesday showed businesses across the country are seeing rising price sensitivity among their customers.

In the Atlanta district, for example, “contacts reported a continued trend of declining discretionary spending and trading down to lower-priced goods and services,” the report said. “Though this was still mostly concentrated among lower-income groups, middle- to high-income consumers, while continuing to spend, became more selective with purchases and sought discounts.”

Ernest Lee, chief commercial officer at citizenM, a hotel chain with locations in several large US cities, said pricing power with leisure travellers has been challenged this year. He attributes that to consumers spending down cash they saved during the pandemic and the crunch high borrowing costs have put on household budgets. He said a decline in booking lead times this year is one sign of the emerging trend.

“The consumer feels that there will be enough inventory to purchase later or closer to their trip” and they can “still get within their budget,” Lee said.

By Amara Omeokwe