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Published
Nov 26, 2020
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Mulberry upbeat as losses narrow, Asia outperforms

Published
Nov 26, 2020

Mulberry is in the news because of Frasers Group’s potential takeover bid at present, but on Thursday, it also hit the headlines with its half-year results… and they made for encouraging reading.


Mulberry


The company had announced job losses and other cost cuts a few months ago but the focus on Thursday was all about growth, from the recent relaunch of its popular Alexa bag in sustainable materials (which has seen a “strong reaction”, we’re told) to success in key Asian markets.

There was some bad news, of course. In the 26 weeks to September 26, the pandemic drove revenue down 29% to £48.9 million as most of its stores had to close for a long period.

But there were plenty of bright spots and even the fact that it made a pre-tax loss of £2.3 million was encouraging given that the loss was £10 million a year ago. And the after-tax loss was only £2 million, narrower than the £8.9 million of a year earlier.

Also good news was the fact that digital sales rose 68% to £23.4 million and Asia Pacific retail sales increased 28%, “driven by ongoing investment in region”. The group’s net cash was also higher at the end of the period by over £2 million through rigorous cost and cash control”.

The company also said that the sales trajectory has been improving, with sales down 39% in Q1, and by a lesser 18% in Q2. And while the proportion of digital sales fell from 67% in Q1 to 32% in Q2, that latter figure was still much higher than the 17% of a year earlier. The company also managed to recoup some lost outlet store sales by creating a digital off-price site in April.

The company operates 111 retail and franchise partner stores globally and while a number of these are currently closed due to lockdowns, it added that sales trends seen in Q2 continued into October, with improving stores sales, a strong digital performance and continuing growth in Asia. Trading in the eight weeks to 21 November was down 19% year-on-year but with double-digit growth in Asia Pacific retail revenue and in digital revenue.

CEO Thierry Andretta said the firm has made further progress on its long-term strategy “to build Mulberry as a sustainable global luxury brand”. This is focused around “a truly omnichannel network and market leading digital platform, increased presence in Asia, and a relentless focus on innovation and sustainability, offering our customers beautiful products, made to last in our Somerset factories”.

He said the strategy enabled it to “withstand some of the pressures that we have been faced with. In particular, using our global digital network to replace retail sales with digital wherever possible, achieving high growth in China and Korea, and reacting quickly to flex our agile supply chain, enhancing market reactivity and reducing lead time, to match the increase in digital demand”.

That focus on Asian markets was crucial for the firm in the first half as store sales in its core UK market fell 68%, despite a 71% rise in digital UK sales that meant an overall UK sales fall of 33%.

In the rest of the world, excluding Asia, store sales fell 71% and digital rose 48%, resulting in a total sales fall of 34%.

As mentioned, APAC’s overall increase was 28%, driven by a 20% rise in store sales and an 89% digital increase. That said, while it saw Chinese retail sales up 75% and South Korean retail sales up 35%, they were offset by a 26% decrease in Japan.  

The company appears to have been helped in Asia by its new global pricing strategy that applies the same retail price globally rather than goods being more expensive in Asia. It also means the firm expects international revenue as a proportion of group revenue to increase further.

A pivot in its marketing strategy has also been important, with a greater focus on ‘meaningful’ marketing. In early April, for instance, it launched its 'Take Root, Branch Out campaign' with global musicians, poets and chefs taking over its social channels to engage with its community during lockdown.

And in Asia, it focused on very localised campaigns that clearly resonated. September's debut of the Mini Iris handbag, for instance, was launched on Tmall and used an influencer campaign and live stream to make an impact.

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