Financial highlights posted by the Mulberry Group company show that in total H1 revenue declined by 17% to £64.7m.Retail revenue was down by 9% to £45.1m and wholesale revenue was down 31% to £19.6m.
Gross margin was 59.9% as expected, reflecting in part the impact of the new factory as its production efficiency increases. Interestingly the loss before tax was £1.1m which is in line with expectations, reflecting lower sales.
However retail revenue is up 8% for the nine weeks to 29 November 2014, driven by a strong performance by their online business (+18%.)
Whilst the progressive improvement in retail and online sales trends is encouraging, the next few weeks trading through until Christmas and into January are very important to the full year result.
Godfrey Davis, Chairman at Mulberry said, “The results for the six months to 30 September 2014 are in line with the guidance given on 14 October. We have continued to take steps to return the business to growth and sales for the nine weeks to 29 November are encouraging. Total retail sales are up 8% compared to last year, including online sales, +18%. We have worked hard to re-engage with our customers and our tongue in cheek Christmas video #WinChristmas has been viewed well over one million times. After a difficult couple of years, the steps that we have taken to return Mulberry to growth are beginning to bear fruit and looking further forward, we expect to gain further momentum from the appointment of Johnny Coca as our new Creative Director.”
The company appointed a new independent non-executive director, Julie Gilhart. Ms. Gilhart is a freelance fashion consultant who has advised many clients including Amazon.com and LVMH. Previously Julie spent 18 years in various roles at Barneys New York, most recently as Fashion Director. She currently holds board positions with Outerknown LLC and Parsons/New School. The company went on further to say “As announced on 16 September, we are deeply saddened by the recent passing of one our non-executive directors, Mr. Bernard Heng. Mr. Heng made a substantial contribution to the Group as a non-executive director for 11 years and will be greatly missed.”
Julie Palmer, Partner, Begbies Traynor commented: ““Having issued five profit warnings over the past two years, the market has come to expect bad tidings from handbag maker Mulberry, and their first half results are no exception. Risky management decisions such as using more expensive materials in order to push the brand further upmarket, combined with falling tourist footfall to their UK stores and weaker demand in key markets like China, have all contributed to the announced £1 million losses reported today.
“However there are cheerier signs on the horizon for the much loved British brand. A concerted effort to return to selling affordable luxury items while at the same time bolstering their online offering have contributed to a significant pick up in current trading ahead of the peak Christmas period. Only time will tell whether this improved sales performance is enough to offset the Group’s increased cost base and the lower margins.”
The Group has considerable financial resources together with a customer base split across different geographic areas and between directly operated stores, partner stores and wholesale accounts. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. In addition, during June 2014, the Group arranged a £7.5 million revolving credit facility to provide additional headroom in available funds. This facility will be in place for a period of two years from the date of first draw down. The first draw down was made in October 2014. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the uncertain economic outlook.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half year results.