Full year results from English luxury brand Mulberry (MUL:AIM) demonstrate the fashion bags-to-footwear retailer’s turnaround is very much on track.
Robust organic growth and online progress are reported and margins strengthened significantly in the second half.
Yet the shares are off 2.6% at £11.19. Forward-looking investors appear to be discounting the cautious tenor of the current trading statement.
SLUGGISH START
Alongside otherwise encouraging annual numbers to the end of March, which you can pore over in detail here, the Bath-heaquartered British brand champion reports modest 1% retail like-for-like sales growth for the 10 weeks to 3 June.
This sluggish start to the new financial year must be seen in the context of a tough comparative and a seasonally quiet period for Mulberry.
UK like-for-like sales edged up 2% in the opening 10 weeks and ‘continue to benefit from an increase in tourist spending in London, although domestic demand has been softer’, cautions Mulberry.
The luxury goods retailer and wholesaler is among those companies vulnerable to a slowing of inbound tourism following the UK’s recent terrorist attacks.
Moreover, Mulberry warns that ‘international like-for-like sales show a weakening in non-strategic locations with management continuing to focus on the optimisation of the store network.’
TURNAROUND ON TRACK
Trickier recent trading notwithstanding, Mulberry’s turnaround has traction. Pre-tax profit rises 21% to £7.5m on sales up 8% to £168.1m in the year ending 31 March 2017. Retail sales including digital rose 5% on a like-for-like basis.
New products launched under the creative direction of the exotically named Johnny Coca, including the new bestselling Zipped Bayswater bag, are gaining momentum.
Barclays Capital highlights an annual gross margin of 61.6% (2016: 62%), ahead of its 59% estimate.
The investment bank flags a strengthening of gross margin in the second half thanks to product and factory efficiency gains which are being reinvested into marketing.
Mulberry closed the year with £21.1m cash in the coffers and no debt, meaning it has the financial headroom to grow its core leather goods business and stretch the brand into categories including footwear, accessories and jewellery.
While the international luxury goods market remains difficult, bulls argue Mulberry is unique among listed peers in being immature in global luxury markets outside the UK.
With oodles of overseas growth to go for, it is pleasing to note Mulberry’s progress in Asia.
The AIM-listed stalwart recently established a majority-owned entity, ‘Mulberry Asia’, with Challice to operate the business in China, Hong Kong and Taiwan, key markets for luxury goods.
Chief executive Thierry Andretta enthuses that sales and profits are growing, enhancing its strong cash position.
‘We have advanced our international growth strategy with a new partnership in Asia and the continued expansion of our omni-channel offer in key markets.’
We have generated strong creative momentum with new products that are well received by our existing and new customers. Looking ahead, we will continue to invest in advancing our international development and increasing Mulberry's relevance to our customers' rapidly evolving lifestyle.'
