Mulberry H1 pre-tax profit slides on store openings

Luxury UK fashion house Mulberry has seen its first-half pre-tax profit slide as it invested in opening new stores abroad.

The company said profit before tax fell 36% over the six months to 30 September, dropping to GBP10m from GBP15.6m in the same period of the prior year.

Revenue grew 6% to GBP76.5m as retail revenue rose 13% to GBP46.5m, rising 7% on a like-for-like basis.

UK retail sales grew 9% to GBP39.2m, with full price sales performing well, up 14% when compared with the same period of last year, despite the challenging economic environment. UK outlet sales were weaker, down 13%, partially due to the company’s decision to stop making products specifically for the outlet business.

International retail sales were up 40% to GBP7.3m, with the company opening stores in San Francisco, New Jersey and Zurich over the period. It expects to open 17-20 new stores by March 2013.

Wholesale revenue fell 4% to GBP30m, which Mulberry attributed to account rationalisation and a more challenging environment, especially in Asia where there was “cautious ordering by franchise partners”.

Gross margin declined to 61.3% from 66.2%, but is expected to recover in the second half of the year.

The company said it is encouraged by trading in the second half to date, “despite the challenging economic environment”.

Over the nine weeks to 1 December, total retail sales grew 19% on the same period of the prior year, and like-for-like sales rose 11%.

The company expects its wholesale account rationalisation and cautious ordering by partners to drive a decline in wholesale revenue, which is likely to be down 10% for the full year.

“We continue to focus on creativity, craftsmanship and quality and will place great emphasis on reinforcing Mulberry’s luxury positioning through the quality of our products, retail experience, marketing communications and choice of distribution channels,” said chief executive Bruno Guillon.

“During the period, we have rationalised certain wholesale accounts and refocused the outlet business which has impacted financial performance in the short term. However we firmly believe that this is in the long term interests of transforming Mulberry into a global luxury brand.”

He added that the company has begun the construction of its second UK factory, which will create 300 jobs and open during the summer of 2013.


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