Monday, 5 October 2020

Loss-making Mulberry has it tough, but e-tail, new stores, Asia are strong




Lots of results announcements have been delayed this year due to the coronavirus crisis and when they come out they, often seem to come from another era. So it was with Mulberry on Monday, which released preliminary results for the year ended March 28, with the figures containing only a tiny coronavirus impact. But the luxury leather goods specialist also included a current trading update and said that trading since the start of the current financial year (which included the full impact of the pandemic) is ahead of its early expectations.


The company is now operating in a new phase with creative chief Johnny Coca having left just after the financial year-end and the firm now focusing on its core leather goods as it exits ready-to-wear after the AW20 season. So how is this new approach doing? “Ahead of expectations” means group revenue is down 29% for the half-year up to September 26, but this a respectable figure gave the closure of its stores during global lockdowns. And there’s been an improving trend since the shops reopened. Digital revenue has risen 69% as well, while Asia-Pacific retail revenue is up 27%.

The company boosted its digital sales during lockdown by establishing an off-price website to replace lost sales from its outlet stores and this website has been successful, it said.

It added that it has enough cash to get through the crisis and expects its losses to be lower in the current financial period, which is good news. 

LAST YEAR WAS LOSS-MAKING

Looking back at the last financial year, it saw major challenges as retail conditions were tough. On an underlying basis, revenue fell to £149.3 million from £166.3 million in the previous year. However, the previous period covered 53 weeks rather than 52 so its figures will have been artificially inflated. 

Gross profit was £91.1 million, down from £102.3 million. The company was loss-making with a reported loss of £47.9 million, although on an underlying basis this was reduced to a loss of £14.2 million (on an underlying basis, it made a £1 million profit a year earlier). The reason the adjusted and unadjusted figures were so widely different was that adjusting items added up to £33.7 million. These took in shop closure costs and other items related to the expected impact of the coronavirus on future trading.

Mulberry said that its revenue fall mainly reflected “a challenging UK market and the impact of Covid-19 towards the end of the period”. Group revenue had been tracking down only 6% before the start of Covid-19.

But international retail sales increased 4% to £32.4 million, representing 26% of retail revenue, compared to 23% in the previous year. Asia Pacific retail sales increased 30%, driven by ongoing investment in the region, although this was offset by a 14% decrease in rest-of-world retail sales, which included some store closures.

During the year, direct-to-customer sales represented 91% of group revenue (up from 88%) and were £135.4 million, compared to £146 million a year ago. Digital sales as a proportion of group revenue were 24%, up from 22%.

NEW STORE CONCEPT

The company has been reshaping its store portfolio in recent periods and said that its new store concept is now in 28 locations (including eight partner-shops), “driving a significant lift in sales per square foot”.

The new concept features design elements to represent its British heritage and enables it to better display and promote its collections, as well as having lots of techs and more space. Those new concept stores are outperforming more traditional outlets.

CEO Thierry Andretta Took a cautiously upbeat stance, highlighting strategic and operational progress during the most challenging market conditions in the history of the brand”. 

He said: “Prior to the impact of the pandemic we were performing well and on track to record a pre-tax profit in the second half of the year. This was due to progressing our four-pillar growth strategy: our omnichannel distribution, our international development in Asia, a drive for constant innovation, and sustainability. 

“The group has been able to withstand some of the pressures that we, and indeed the entire retail industry, have been faced with.

“Post-year-end, the group has continued to benefit from its long-term strategic focus with initial sales ahead of our early expectations. However, we cannot escape the reality that British luxury and UK cities face a very uncertain future, hampered by necessary but dramatic social distancing measures and alarmingly low levels of footfall, as well as the pressures of high rents and business rates and the upcoming changes to tax-free shopping.”

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