Difficult times for Mulberry

“Mulberry ended the year to 31 March 2014 in line with the guidance given in April…”, said Godfrey Davis, executive chairman of Mulberry as the company released its preliminary results today (12^th June).

Yes indeed, after the company issued a profit warning in April – in a move that was hot on the heels of its profit warning in January – expectations were well and truly managed.

As expected, Mulberry’s numbers weren’t great.

For its year ended 31^st March, Mulberry took total revenue of around £164m, representing a 1% decline over the same period last year.

By business, the company’s retail sales were up 2% over last year – at £109m, though down 3% on a like-for-like basis. Wholesale sales, on the other hand, plunged 6%, coming in at some £55m – the drop, according to the company, reflected slower UK and Asian sales

For the period, the company’s pre-tax profit came in at £14m, making a 46% decline from the same period the prior year. Mulberry’s net profit for the year was £8.6m, down from £18.7m last year.

The decline in profit was attributed to increased costs associated with new store openings, among other expenses.

Meanwhile, during the ten weeks to 7^th June, Mulberry’s total retail sales were down 9% from the same period last year – and down 15% on a like-for-like basis. On the wholesale front, the company expects a “double digit” decline in sales for the year.

Despite the not-so-great numbers, Mulberry’s shares are up today: its numbers could’ve been worse. Meanwhile, the company’s turnaround plan is underway.

Mulberry’s turnaround plan

Indeed, the company is going through something of a change, following an attempt to conquer the upper end of the luxury market spectrum (via quality enhancements which translated into pricier products).

That attempt, which also saw Mulberry move to expand its geographic footprint, met with some challenges. A series of profit warnings followed – as did the resignation of Mulberry’s then-CEO, Bruno Guillon, in March this year.

In April, Mulberry announced that in a bid to restore growth, it’s re-focusing its product offering – this means renewed emphasis on bags in the “key price range of £500 to £800” (as opposed to the above £1,000 mark).

Well, Mulberry’s about-face is certainly pragmatic, if nothing else.

And according to Mulberry latest update, its first step into this transformed approach (the launch of its Tessie collection) is “proving popular”. Additionally, the company’s plans for further international expansion bode well.

That’s not to say that Mulberry’s set to have an easy time of it. For starters, despite the relatively decent brand name, it faces heavy competition from a variety of players.

Nonetheless, it’s a step in the right direction for a return to growth in the long term, though in the meantime, the company’s shares are unlikely to improve markedly as its challenges persist.