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Mulberry still struggling in UK but Asia focus is paying off

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today Nov 13, 2019
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Luxury may be stronger than many other segments of the fashion retail market but that's not to say some of its major names aren't facing their own problems. And on Wednesday British luxury label Mulberry reported its results for the half year to the end of September and talked of "challenging UK market conditions”.


Mulberry



So what does that mean in terms of numbers? Well, revenue of £68.9m was only slightly higher than the £68.3m of a year ago, with the UK falling 4% but international rising a healthy 12%. Gross profit fell slightly to £41m from £42m and the loss before tax and IFRS16 was £9.9m. It was wider than the £8.2m this time last year, on the back of further investment costs and the impact of that challenging UK market.

But even with the challenges, it’s continuing to forge ahead with its transformation strategy. Direct-to-customer (sales generated through Mulberry stores, department store concessions and digital channels) now accounts for around 90% of revenue compared to 84% a year ago. And Asia accounts for 14%, up from 9%. Digital is progressing too with sales here up a very pleasing 23% during the period. 

And its new products are making a big impact. It recently launched a collection with Acne Studios and overall, newly launched bags represent over 80% of full-price bag sales, with two new styles, Millie and Iris, proving popular. It also said a new direction for men's leather accessories for AW19 is aimed at attracting the digital, fashion forward customer and “has generated encouraging momentum with the newly created Urban family becoming a bestseller”.

Meanwhile in lifestyle categories, including RTW, shoes, soft accessories, jewellery and eyewear, it’s continuing to develop new products and has seen a strong performance from new trainer styles and sunglasses.

UK CHALLENGES

But what about that difficult UK market? The company may have opened a shiny new flagship on Regent Street a little over a year ago, but traffic to it stores overall was lower in H1, the UK also being affected by an "increasingly promotion-led environment”.

The performance remains a problem as the country still accounts for 65% of sales. This may be down from 68% a year ago, but the percentage is still very large.

In the UK by the end of the half, it operated 55 retail stores, with 19 John Lewis and 14 House of Fraser concessions. During the period, it opened more John Lewis locations and closed HoF sites. And it rolled out its new tech-based experiential store concept to more UK (and International) locations and this “has generated a positive customer reaction”.  

But that’s not been enough to boost UK footfall and the company thinks it's likely to see more of the same in the period ahead with international still looking strong but the UK remaining challenging.

Yet even with the difficult conditions in its domestic market, the company said it expects the group to trade profitably and to generate cash during H2.

ASIA FOCUS

Mulberry said Asia “continues to represent a significant growth opportunity and [is] a key strategic focus for the group” with the region currently generating double-digit sales growth.

The International store network totalled 68 stores at period-end, up from 63, with 32 of them in Asia. And it said its now-wholly-owned Korean subsidiary has seen "strong" like-for-like sales in recent months. Trading in mainland China and Taiwan has also been “promising”, although Hong Kong has been “significantly affected by ongoing disruption in this market”. And while Japan remains “a relatively nascent market” with just seven stores, “momentum has accelerated” since a recent major marketing event, “driven by a particularly strong performance" from the new Iris bag.


Mulberry



In other international markets, it continues to “refine and enhance its presence”. A store was opened during April in Rockefeller Center, New York on 5th Avenue, the first in this market to introduce the new store concept. Digital and omnichannel sales in the US have grown by double-digits. But in Europe, sales in the group's Paris store were affected by the yellow jackets protests.
 
CEO Thierry Andretta said the firm is making progress and is working to make international a greater proportion of group revenue. He also said the business is becoming more sustainable and it’s “progressing the use of recycled materials and sourcing 65% of our leathers from environmentally certified tanneries while maintaining an accessible luxury price positioning”.

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