Mulberry share price up 22.5% as surge in sales sees luxury bag maker return to profit

by Jonathan Adams
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The Mulberry share price leapt 22.5% yesterday after the British fashion company best known for its luxury leather handbags announced a return to profit thanks to a recent surge in sales. Group revenues for the half year to September 25 rose 34% to £65.7 billion, generating a £10.2 million profit compared to a £2.4 million loss over the same period a year ago.

Mulberry told investors demand for its luxury leather goods has now returned to pre-pandemic levels with sales in its domestic UK market and Asia the main catalyst behind the bounceback. The company is also optimistic about the Christmas period after sales improved in October and November. Retail sales were up 35% over the eight weeks to November 20.

mulberry group plc

However, the company warned any new pandemic-related restrictions over the run-up to Christmas would be expected to hurt what is currently a positive outlook. Most of Mulberry’s revenues are generated in-store with e-commerce accounting for a much smaller portion of the sales of luxury goods compared to those with more mainstream pricing. The luxury goods group had to cut its staff count by 25% last year as a result of enforced store closures over lockdown periods and weaker footfall when customers were allowed in-store.

However, with in-person traditional shopping back and benefitting from pent up demand, Mulberry has enjoyed a strong 2021 recovery that has since its share price gain over 62% since the start of the year. It is up around 45% over the past twelve months.

Speaking at the company’s announcement of its half-year results, Mulberry chief executive Thierry Andretta said the goal is now “to continue to lead the luxury industry”, adding that he was “very proud of what our team has achieved”. He put the company’s ability to bounce back from the trials of a pandemic-blighted 2020 to keeping faith with to its long-term strategy of developing its shop and online services. Mulberry also credit the turnaround to having resisted the temptation to keep sales flowing last year by discounting, which it sees as detrimental to its luxury brand. As a result, it has maintained margins at 69%.

“After having spent a good period of time being online, you want to enjoy returning to life and a good customer experience. With a luxury product, the sensory experience is completely different, customers want to compare or ask questions”.

With a history that stretches back to 1971 when Mulberry was founded in Somerset, the leather goods company now has 40 stores around the UK and a strong international presence, especially in Asia, with multiple stores in Japan, China and South Korea. The company currently employs around 1200 staff between its stores and offices.

A new marketing push is also being planned with a global marketing campaign designed to raise brand awareness over the next six months to be financed from the company’s “substantial cash reserves”. China is seen as the market with “most potential front of house growth”, and will be the epicentre of the marketing push over coming months.

Mulberry has managed to avoid many of the supply chain issues that have recently hurt rivals due to its UK-based factories and “careful planning”.

Online sales were down 19% on last year when shops were closed for extended periods but more than compensated for by 87% growth in in-store sales which brought in £36.5 million of revenue compared to the £19.1 million generated online.



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