News Column

Mulberry profits hit after failed strategy

June 13, 2014

LUXURY handbag maker Mulberry has warned it will take time to return to growth and hire a new creative and management team after an ill-fated attempt to move further upmarket took its toll on sales and profits.

The brand, which has issued a string of profit warnings, said the full benefits of its strategic U-turn would start to be felt only next year when its first lower-priced collection hits the stores in May.

Mulberry declined to provide a sales growth forecast for the current year, with executive chairman Godfrey Davis admitting: "This is a reasonably tough year for us."

Mr Davis, however, said he expected trading to improve in the second half of the year thanks to new product launches.

Mulberry saw same-store sales fell three per cent in the year ended March 31. There has been a further drop of 15 per cent in the 10 weeks to June 7, but Mulberry said that was worsened by comparing it with last year's boost from clearance sales.

The brand's retail sales, from directly operated shops, represent about 70 per cent of total revenue.

There was a near halving of pre-tax profit in the year to March to pound(s)14 million, from pound(s)26 million, with total sales down slightly at pound(s)163.5 million.

Barclays said in a note: "Mulberry enters the new (fiscal) year in a state of transition."

Mr Davis said Mulberry, known for its classic brown leather bags with locks inspired by a postman's satchel, was going back to its roots of providing people with "everyday, practical and beautiful things".

A priority for the group is to hire a new creative director following Emma Hill's departure last September.

Mr Davis hopes that will be done before the end of this year and he said research on getting a new chief executive had also started.

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Source: Herald, The (Scotland)