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Mulberry H1 Revenue Falls in U.K., Rises in China Despite Restrictions

LONDON Mulberry Group saw sales in the U.K., its number-one market, fall 10 percent in the first half, while business in China was up 6 percent despite lockdown restrictions in the region.

Overall, group revenue was broadly flat in the six months to Oct. 1, dipping 1 percent to 64.9 million pounds.

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Mulberry notched a pre-tax loss of 3.8 million pounds compared with a pre-tax profit of 10.2 million pounds last year.

The results sent the share price down nearly 16 percent to 2.40 pounds in late-morning trading on Wednesday. The shares recovered some ground later in the day, closing down 9.8 percent at 2.57 pounds.

The British accessories brand, which has been focusing on sustainability and aiming to become net zero by 2035, said U.K. retail sales fell to 34.1 million pounds, impacted by the broader economic environment.

By contrast, retail sales in China increased despite the country’s ongoing COVID-19 restrictions.

The China increase contributed to an overall 1 percent uptick in Asia Pacific retail sales to 11.9 million pounds. The company said growth in the region was fueled by new store openings in China, and the launch of digital platforms in South Korea.

Mulberry said international retail sales remained in line with the same period last year at 17.5 million pounds.

The company said the pre-tax loss was due mainly to investments, including new store openings and franchise repurchases.

Mulberry also faced tough comparisons with the corresponding period last year when the company benefited from business tax relief and an extraordinary gain on the disposal of the lease on its Paris store.

Chief executive officer Thierry Andretta said Mulberry delivered a “resilient performance” across the group, supported by strong international demand and “continued investment in the U.K.”

In the current quarter, the company said it saw “an improved trend” in retail revenue for the eight weeks to Nov. 26 compared to the same period last year, but flagged “ongoing uncertainty in the economic and geopolitical environment.”

It also noted that it generates most of its revenue in the the second half, which includes the holiday trading period.

A look from Mulberry’s holiday 2022 campaign.
A look from Mulberry’s holiday 2022 campaign.

“Looking ahead, we are confident in our ability to execute our strategy and to continue to invest across the group for our future growth, in spite of the challenging economic and geopolitical backdrop,” Andretta said.

“We are well placed for the festive trading period, and will continue to drive the business forward to the benefit of all stakeholders,” he added.

In a telephone interview, Andretta said the growth in China was due chiefly to a 23 percent rise in digital sales and the opening of a distribution center in Shanghai that has facilitated deliveries during the recent lockdowns.

The company has also been building and opening stores in the U.K. and internationally.

In October, Mulberry opened a new unit at Battersea Power Station and continued to build its direct-to-consumer business with the acquisition of five stores in Australia, and three stores in Sweden previously operated by a franchisee.

Andretta said the first-half numbers reflected the cost of those investments.

Mulberry’s business is now around 85 percent direct-to-consumer, with the rest coming from wholesale and franchises.

Digital sales accounted for 25 percent of total group revenue in the six-month period, compared with 29 percent in the corresponding period last year. Andretta said thta U.K. customers have “continued to return to a physical shopping experience” post-pandemic.

Andretta added that while consumers may be returning to the stores in the U.K., local business has been hampered by the government’s decision to cancel the tax-free shopping program, which was a big driver behind international tourist spending.

Mulberry does 60 percent of its business in the U.K., and Andretta said the brand’s most high-profile and most expenstive store, at 50 New Bond Street in London, was suffering from a downturn in international business.

He said some 45 to 50 percent of the Bond Street business used to come from shoppers taking advantage of the tax-free program, and added that Mulberry and many other businesses “would like the government to reconsider” its position on the program.

“It’s impacting us as a tourist destination. Sales in the U.K. are clearly not where we’d like them to be, and that’s due partially to the absence of tax free,” he said.

Asked about pricing, Andretta said the brand was keeping most prices below the 995 pounds sweet spot, and has raised prices by 4 to 7 percent only at the very top end of the range.

On the back end, Mulberry said it has invested in special projects and IT systems that will underpin its wider business and omnichannel growth in the longer term.

The company added it remains committed to its Made to Last green manifesto, which includes a commitment to source 100 percent of its leather from environmentally accredited tanneries; and its Pre-Loved bags circular platform.

The company also has a Lifetime Service center at its Somerset, England, factory where customers can get their bags and leather goods repaired and rejuvenated. Mulberry said the center restores more than 10,000 bags a year.

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