Mulberry sales rise but losses widen as growth investment continues

Mulberry’s half-year results (to the end of September) on Thursday showed sales continuing to rise, although margins were down slightly and the company reported wider losses than a year ago as it continued to invest in future growth.

It remains upbeat and said that since the period end, it launched two new bag families globally, the Lana and the Pimlico, “which are performing well”.

The company said it’s “well prepared for the second half of the financial year, which is weighted in trading given the important festive trading period”. 

Looking at the H1 figures, the company said that group revenues rose 7% (or 8% at constant exchange rates) to reach £69.7 million. UK retail sales were impacted by the broader economic environment, but still managed to rise 6% to £36.2 million. 

International retail sales (39% of total retail revenues) jumped by an impressive 34% (or 35% at constant rates) to £23.5 million, although this was partly due to its strategy of bringing ownership in-house of overseas stores, including Sweden and Australia. But the company is still making big strides in some overseas markets and revenue in the US increased by 38% (42% at constant rates) with the company saying this was due to increased brand awareness.

In Asia Pacific, retail sales, including the first full period of ownership of its Australian stores rose by 13% (or 18% at constant rates) to £13.5 million. That said, underlying retail sales fell by 7% (or 3% without exchange rate fluctuations) due to the “challenging China macro-economic climate and reduced footfall across the region”.

The gross margin of 69% was slightly below the prior period’s 71% and the underlying loss before tax of £12.3 million widened from £2.8 million a year earlier. 

It included £3.3 million this time of Software as a Service (SaaS) costs, plus the additional operational costs of its new stores in Sweden and Australia, and additional important investments for future growth in the group. That figure was £0.8 million a year ago. The reported loss before tax was £12.8 million, worse than the £3.8 million this time last year.

The company said its collaborations with Paul Smith, Axel Arigato and Stefan Cooke “drove further global awareness of the Mulberry brand” and product innovation continued in the period with the launch of new bag families including the Islington and the Retwist

Pop-ups also continued to allow it to “efficiently to reach new audiences, with Leccio giving us invaluable insights into the Italian market”.

CEO Thierry Andretta said: “Against a challenging macro-economic backdrop, which is impacting the entire luxury landscape, we have continued to invest in our long-term future.

“Our strategy to transform our international businesses to a direct-to-consumer model has enabled us to control the entire customer experience in Sweden, Australia, New Zealand and Japan. Our investments in the period in our digital systems, stores and product will power future growth. 

“Our recent product launches, the Islington, Pimlico and Lana have been well received by customers. Looking ahead, we are well placed to capitalise on the important festive trading period and expect the usual second half weighting to trading.”

But he ended by reiterating the tough backdrop and the need to restore UK VAT-free sales for tourists: “There is no doubt that the macro-economic environment has deteriorated, and this has had a knock-on effect on consumer sentiment. We have ensured that we are prepared to navigate this tricky environment, and we are confident in our ability to continue to execute our strategy. I continue to believe that offering VAT-free shopping in the UK would be one of the most effective ways to encourage business growth in this country. The fact this has not been reinstated is creating challenges for all sectors. As we look ahead to the New Year, I urge policy makers to collaborate with all industries campaigning on this issue and reconsider implementing this to support businesses across the UK.”