Mulberry warns on profit
Luxury handbag retailer Mulberry has warned that its full year pre-tax profit is expected to be significantly below expectations after first half trading conditions were more difficult than anticipated.
In the six months to end September, revenues dropped 17% from a year earlier to £64.7 million while retail sales fell by 9% to £45.1 million.
While UK full price sales declined by 12% to £20.9 million, UK outlet sales continued to fall to more normal levels from unusually high sales during the prior year when discontinued inventories were being cleared. Outlet sales fell by 23% to £10.1 million.
In a statement, the company said: “As reported on 12 June 2014, the company anticipated a challenging year. The first half was expected to be particularly difficult, with it taking some time for the measures implemented after the April management change to take effect. Actual trading conditions have been more difficult than expected, in part due to the continuing headwinds affecting the luxury sector.”
International sales fared better, rising by 20% to £7.5 million.
Online sales edged up 1% to £6.6 million to account for 10% of company sales.
Meanwhile, wholesale sales declined by 31% to £19.6 million. Mulberry said the decline was greater than expected and reflected a combination of inventory reduction and conservative ordering by its Asian and European franchise partners.
Looking ahead, Mulberry said the launch of its Tessie bag family during June and a new family of bags developed with Cara Delevingne at the beginning of September, had both contributed to improving sales trends. The next new product will arrive in-store in time for Christmas with the launch of the new Blossom tote bag, the Mini Lily and a new collection of small leather goods.
Mulberry chairman Godfrey Davis said: “As I explained in June, my first actions on returning as acting chief executive focused upon reinforcing our product ranges. I explained that the impact would be progressive and should produce benefits over the medium term. The new products are beginning to reach our shops with the launch of the Cara Delevingne bags at the beginning of September and with further new product being offered in our shops during November.
“As expected, the first half has been difficult, but the group remains profitable and cash generative, giving us the resources to invest for the future. Despite the current challenges, I remain confident that we will build on Mulberry’s solid foundations and unique brand positioning in the luxury market to restore growth in the medium term.”
