Somerset, England—Mulberry Group reported today its first-half profits slumped 30%, after higher costs related to its continued expansion efforts offset a slight rise in sales.
Net profit reached 5.1 million pounds (about $8.3 million) for the six months to Sept. 30, down from 7.3 million pounds in the same period of last year
Operating expenses increased 13.7% to 42.2 million pounds from 37.1 million pounds in the previous year, related to new directly-operated stores and additional employee costs.
The company said sales grew 2% to 78.1 million pounds from 76.5 million pounds last year, despite what it described as a “tough economic climate.” Retail revenue grew 6% to 49.5 million pounds, while like-for-like sales were up 4%.
‘Cautious’ Wholesale Ordering
International revenue jumped 29% to 6.3 million pounds to 4.9 million pounds, reflecting an improvement in North America and continued growth in Europe.
Wholesale revenue was down 5% to 28.6 million pounds, due to cautious ordering by European and Asian distributors, which Conlumino analyst Anusha Couttigane warned is “something Mulberry will need to rectify as it pursues plans for international expansion”.
The company completed the construction of its new Somerset factory, which is already in production and is expected to be at full capacity by mid-2014.
Mulberry said it continues with international expansion efforts and is on track to open 15 new stores by the end of the full year. The brand has also secured a location for a flagship store in Paris, which is expected to open in 2014/2015.
Couttigane added: “While this continues to be a challenging year for Mulberry, its latest results are promising, indicating that the designer handbag label still represents a hugely lucrative business.”
During the nine weeks to Nov. 30, the luxury brand saw retail revenue climb 3%, while international retail revenue surged 49%.