Mulberry: First-half turnaround is encouraging, and the second half is off to a good start

Mulberry's first-half turnaround is encouraging, and the second half is off to a good start
Mulberry's first-half turnaround is encouraging, and the second half is off to a good start/courtesy...

Mulberry announced encouraging news on Wednesday, saying that in the 26 weeks ended September 25, the company made more strategic success amid robust consumer demand. And, according to CEO Thierry Andretta, the “bold decisions we’ve made in terms of focusing on our UK production capabilities mean that we’re well positioned for the festive trading period and beyond.”

It’s wonderful news for the company, which has had its share of ups and downs in recent years, and it indicates a healthy comeback from the epidemic.

The group’s revenue increased by 34% year on year to £65.7 million (also up 3 percent compared to 2019 on a comparable basis). And pre-tax profit increased to £10.2 million from £2.4 million a year earlier, despite a £5.7 million one-time windfall on the sale of its Paris shop lease.

Despite that boost, the company is becoming more profitable on an underlying basis, with gross margin rising to 69 percent from 59 percent a year ago as a result of its strategic focus on full-price sales and improved volume efficiencies.

Overall, retail sales increased by 30% to £55.6 million throughout the period. They climbed by 36% to £38 million in the domestic UK market. It added that sales in the UK “recovered strongly once our stores reopened.” And the revenues lost due to the lack of tourists in the United Kingdom — as well as store closures in Europe — were matched by significant growth in Asia.

China retail sales climbed by 38 percent, contributing to a 23 percent growth in Asia Pacific retail sales to £11.8 million, “indicating sustained investment in the region,” according to the report. However, regional and local lockdowns “disrupted to some extent” South Korea and Japan during the era. Although overseas retail sales represented a smaller 40% of group income compared to 41% a year ago, they climbed by 57 percent to £3.3 million in the United States, indicating that the pandemic was still having an impact in H1.

The fact that franchise and wholesale sales grew 67 percent to £10.1 million was also promising, indicating that the recovery has begun.

Despite the fact that digital sales were down 19.1% year over year due to the reopening of physical locations, they still accounted for 29% of overall group revenue.

Across the board, the company has seen a rapid move to digital and omnichannel commerce. For example, digital sales in the Asia Pacific increased to 19% of total sales, owing to local fulfillment in Japan and the establishment of key partnerships, such as T-Mall in China. In China, digital sales increased by 22% and now account for 43% of total sales. It also launched a We Chat campaign in the country in July, coinciding with the introduction of Alexa x Alexa.

Retail revenue in the eight weeks leading up to late November was up 35% compared to the same period last year, indicating that the company’s recovery isn’t slowing down. In addition, the company saw improved store sales, a solid digital performance, and continued expansion in Asia during October and November.

In the second half, “a steady rise in marketing investment is expected to continue developing brand awareness internationally” due to “the good success in the first half and the group’s large financial reserves.”

The company has been working hard to improve its long-term sustainability and has achieved significant progress. It has also progressed in terms of modernizing key areas of the business. There are projects underway to modernize the company’s legacy systems as well as establish the next generation of digital and omnichannel platforms. This is projected to result in more capital investment next year and the future.

The corporation appears to have enough cash on hand to see this through. Moreover, its increasing revenue has continued to exceed its original base case expectations after the first half, “with a cash position considerably ahead of assumptions,” it said.

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