Somerset, England—True to its previous warnings, Mulberry today reported a 28% drop in its pre-tax profits for the year ending March 31.
The British luxury leathergoods house said profits fell to 26 million pounds (about $39.5 million) from 36 million pounds a year earlier. On a per share basis, earnings were 32.0 pence, lower than 43.4 pence a share a year earlier.
Net revenue edged down to 165.2 million pounds from 168.5 million pounds primarily due to weakened demand and slower growth in Asia, a situation that other luxurygoods companies have reported.
Bruno Guillon, chief executive, was quick to defend the company especially in light of the news earlier this week that Emma Hill, the brand’s creative director since 2007, would be leaving the company.
“After three years of rapid growth, we have had a year of consolidation during which we have laid the foundations for the transition of Mulberry from a UK success story into a global luxury brand,” said Guillon.
Creative Director Emma Hill to Leave
Although retail revenues at the company’s own stores rose 8%, its wholesale revenues fell 16% to 57.9 million pounds, “reflecting European account rationalization and destocking by Asian partners,” the company said.
Mulberry had issued two warnings about the profit fall, but its shares were hit again earlier this week by news that Hill, who developed some of the iconic styles for the brand, would be departing.
Last November, Mulberry increased its prices by some 12% and added more handbags at pricepoints over 1,000 pounds (about $1,600) to attract more affluent consumers especially in Asia and the Americas.
But Guillon downplayed the higher end shift, noting 60% of Mulberry’s merchandise still retails for less than 1,000 pounds.
“Mulberry has a well-established business in the UK and a growing presence in Europe. With over 80% of our sales derived from these markets where the economic climate remains difficult, Mulberry’s challenge for the future is to accelerate our brand awareness in the US and Asia,” Guillon said. “Greater visibility in Asia will allow us to benefit from tourist traffic in Europe and the US at the same time as growing our business locally.”
Mulberry said that in the year to the end of March it opened 17 new international stores and recently completed the construction of a second Somerset factory that will double its UK production capacity.
Five partner stores were also opened in Korea with others in Singapore, Shanghai, Beijing, Nagoya and Bahrain.