New products help Mulberry to good year but current sales growth has slowed
“Continued growth, international development and product investment,” that was the headline story Mulberry wanted to promote as it released its preliminary results for the year to March 31.
And it had every justification for doing so with no need to put a positive spin on weak figures because the company was clearly getting back on track after a bruising period when strategy missteps saw it going into decline.
Just look at the figures and you’ll see what we mean. Total revenue rose 8% to £168.1m, pre-tax profit jumped 21% to £7.5m, the company had £21.1m in cash on its books (a key measure of a healthy firm and up from just £14m a year ago), and inventory was reduced to £42.8m from the year-ago £44.4m.
However, there are signs that business has slowed down since the year ended just over two months ago so it seems it’s still too early to call out the firm’s full recovery.
But for now, lets look at what contributed to the turnaround in the year to the end of March. The big story was new products, it seems. The items it introduced under the creative direction of Johnny Coca included the new Zipped Bayswater and they continued to gain momentum. Mulberry said the reinvented Bayswater has become an “immediate bestseller since its launch during October 2016 and the family will be further extended in coming seasons.” It has put major backing behind it since the year ended too with the Modern Heritage campaign, which ran during April and May.
It said “there will continue to be a focus on novelty in coming seasons,” which will include the extension of existing bag families into new sizes, as well as the introduction of new bag designs “to cover all functions and lifestyles.”
So how much of an impact did all the newness have on sales? Quite a lot, apparently. It helped retail sales to rise 8% to hit £128.3m and the all-important comparable sales measure was up a buoyant 5%.
It’s interesting too that Mulberry remains committed to wholesale despite many luxury peers retreating from this channel and wholesale revenue, comprising sales to partner stores and selective multi-brand wholesale accounts, increased 7% to £39.8m.
The wholesale trend reflected “a positive reaction to the new collections,” it said and “selective new wholesale accounts were opened in Europe, North America and Asia.”
The improving sales picture is not just about new bags though and omnichannel is an important part of the brand’s progress. Crucially, digital revenue powered ahead by 19% and now represents 15% of the total. That was up from 14% a year ago and was helped by the opening of localised mulberry.com sites in China and South Korea, those sites also being served by a local fulfilment operation.
In fact, Asia is a key focus for the brand and the establishment of Mulberry (Asia) Limited, a majority-owned entity, to develop the brand in China, Hong Kong and Taiwan, should serve up more good news for the current financial year. Since the last year ended, the company has opened new stores in Shanghai and in Hong Kong.
However, the business isn't completely out of the woods just yet with Mulberry saying Wednesday that the gross margin dipped to 61.6% from 62% last year due to start-up costs for new designs and a one-off cost relating to the stock repurchase associated with the North Asia acquisition.
And it also said that comparable sales, including digital, have risen only 1% for the 10 weeks to June 3, which could mean bad news if the strong comp sales momentum slows down. There was already some sign of softer demand during the year to March 31. The company said that the 5% comps rise for the 12 months included a rise of just 2% in the UK, despite the country getting boost from tourist spending due to the weak pound.
The company also said international comps “show a weakening in non-strategic locations with management continuing to focus on the optimisation of the store network.”
CEO Thierry Andretta was cautiously upbeat on the results, hailing the firm’s “good progress” but he held back from issuing any bullish forecasts, which is no surprise given the current trading figures. We await news on how the next few months goes with interest.
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