China, Korea and Digital Channels Help to Buoy Mulberry in First Half

LONDON – Double-digital sales gains in Asia, in particular China and Korea, and in the digital channel helped take the sting out of Mulberry’s performance in the first half, and those positive trends are gaining steam.

In the 26 weeks ended Sept. 26, group revenue fell 29 percent to 48.9 pounds, reflecting the impact of the pandemic and the closure of the majority of stores during lockdown earlier this year.

After-tax losses shrank to 2 million pounds, compared with nearly 9 million pounds in the corresponding period last year. Operating loss in the six months was 202,000 pounds compared with 7.8 million pounds last year.

Mulberry said it slashed operating expenses by 34 percent, on a full-year basis, via a raft of cost-saving measures over the past six months, including a “significant” reduction in discretionary costs, pay and recruitment freezes, and a temporary 20 percent pay cut for directors.

As reported, it has also reduced employee numbers by approximately 25 percent across the group, renegotiated or terminated leases, and did not renew its footwear and rtw licenses. The store network now comprises 111 retail and franchise stores, a net reduction of eight stores since the start of period.

The company said it reduced inventory by 13 percent to 33.6 million pounds, and was able to move quickly with regard to supply chain and stock management.

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Mulberry also confirmed that it took advantage of U.K. government support schemes during lockdown earlier this year.

Those cost controls helped to boost group net cash, which increased to 8.6 million pounds from 6.4 million pounds.

“COVID-19 has had a dramatic impact on our business and we expect the recovery in our sales levels over the medium term to be gradual. Our objective was to ensure that our cost base is in line with anticipated trading levels,” the company said.

As with other fashion and luxury brands, digital sales were robust, rising 68 percent to 23.4 million in the six months while retail sales in Asia-Pacific were up 28 percent, due to “ongoing investment” in the region. China and Korea delivered the best results in the period.

Mulberry said that during the first six months of the year, its sales trajectory improved, from minus 39 percent in the first quarter, to minus 18 percent in the second quarter.

It certainly was a lively half, between the pandemic and the emergence of Mike Ashley’s Frasers Group as a potential bidder for 100 percent of the company. As reported earlier this month, Frasers Group has hiked its stake in Mulberry to 37 percent, and has until Dec. 17 to make a full-blown offer for the British brand, or walk away.

Frasers has confirmed that it’s mulling a cash offer for Mulberry, although it will have to wrest the brand from its majority owner, the Singaporean billionaire Christina Ong, who has a 56 percent stake.

During the first half, Mulberry also released “the most sustainable iterations” of its classic Bayswater and Lily silhouettes in environmentally certified leathers, and also manufactured PPE gowns in response to the crisis, producing 17,000 reusable gowns for England’s National Health Service.

A brighter future is coming into focus, Mulberry said, with the sales trends experienced in the second quarter continuing into October, with “improving store sales, a strong digital performance and continuing growth in Asia.”

Trading in the eight weeks to Nov. 21 was down 19 percent relative to the same period last year, while the brand said it has seen double-digit growth once again in Asia-Pacific retail revenue and in digital revenue

A net cash balance of 5.8 million pounds on Nov. 21, as well as a revolving credit facility, remain undrawn, the company said.

Thierry Andretta, chief executive officer, said he was proud that “in spite of the devastating effects of the global pandemic, we have made further progress on our long-term strategy to build Mulberry as a sustainable global luxury brand. This is focused around: a truly omni-channel network and market leading digital platform, increased presence in Asia, and a relentless focus on innovation and sustainability, offering our customers beautiful products, made to last in our Somerset factories.”

Andretta said that in spite of all of the self-help measures the company took, “we cannot avoid the fact that the damage the coronavirus has caused to business, decimating high streets and the tourism industry, is severe. For this reason, in order to ensure that the business was able to navigate through this difficult time, we took the painful decision to implement a far-reaching cost reduction and optimization program.”

He said he is confident about Mulberry’s strategy and the relevance and durability of the brand.

“There are, of course, many obstacles ahead, not least the upcoming changes to tax-free shopping in the U.K. that could hamper the wider retail and economic recovery,  but we are grateful to be able to open our doors again in England on Dec. 2, and to be able to trade across all our platforms in this crucial Christmas trading period.”

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