Mulberry’s Full Year Profit Surges as International Expansion Continues

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Mulberry's Spring/Summer ad campaign

London—While Mulberry Group reported today that its full year pre-tax profit surged 54% and revenue was up 38%, the results weren’t stellar enough for analysts. Shares of the British luxury leathergoods company, which have increased in value some 35% this year, fell 22% in early trading as Mulberry admitted sales for the 10 weeks ending June 1 were up only 12%.

Concerns over a possible luxurygoods slowdown—due mostly to uncertainty in the Eurozone and even slower economic growth in Greater China—have been an issue with all recent luxurygoods brands’ reports.

Godfrey Davis, Mulberry’s chairman, told British financial press: “I don’t really know why the shares have lost a quarter of their value. I think all I can say is that the juggernaut of Mulberry is very much on track. Next year we have lowered down city expectations a little, because we like to deliver what people expect. But my view is that the business is in good shape.”

Outlook: ‘Surprisingly Cautious’

Noted retail analyst Nick Bubb, the figures for the start of Mulberry’s first quarter may have overshadowed a “fantastic” 2011. Nonetheless, Bubb said: “The outlook statement with today’s results is surprisingly cautious.”

For the year ended March 31, Mulberry reported its preliminary full-year pretax profit rose 54% to 36 million pounds (about $56.1 million) from 23.3 million a year ago.

Total revenue increased 38% to 168.45 million pounds, bolstered by a 61% increase in international sales. Sales at its retail stores increased 36% with comparable store sales up 26%. Online sales, which account for about 9% of total, grew 58%. Wholesale shipments to retail accounts were up 43%, too.

However impressive those gains were, they failed to meet analysts’ average estimate which expected another 2 million pounds in profits and total sales revenue of 172 million pounds.

But Davis and Bruno Guillon, the company new chief executive, both were positive about the long term.

“We continue to focus on developing our business internationally, opening new stores and building the foundations for long term growth,” said Davis, who remains as chairman.

For instance, Mulberry, whose international business accounts for about 39% of total revenue, is opening more stores. So far, 14 stores were opened during the year, in the United Kingdom, Netherlands, the United States, Korea, Singapore, Thailand and Taiwan. And the company confirmed plans for 16 more international stores for fiscal 2013.

U.S. Business Expands

The limited edition Union Jack Bayswater in honor of Queen Elizabeth's Diamond Jubilee

In the United States, Mulberry opened a flagship on Spring Street in New York last year and recently opened a store in the Short Hills Mall in New Jersey. Its first West Coast store opens in San Francisco this month, and another is scheduled to open later this year in Washington, DC.

Mulberry said its North American sales were up 69% to 5.4 million pounds last year with comparable sales up 20%.

The company is also supporting its growth by building a second factory in Somerset in southwest England which will double its U.K. capacity and create 300 jobs. Upon its completion in December 2013, the factory will make Mulberry the largest luxury leathergoods manufacturer in the United Kingdom.

Leathergoods and accessories remain the company’s core business with handbags accounting for about 77% of sales. Mulberry said the fall 2010 launch of the Alexa bag, named for British model/socialite Alexa Chung, was “an immediate success and added an extra dimension” to the full year sales growth.

Now the Alexa collection has become one of the pillar collections for the company along with Bayswater, Daria and Lily. Last month, Mulberry introduced its Del Ray bag, inspired by American songstress Lana Del Rey.

Women’s apparel and women’s footwear were the fastest growing categories during the year, the company noted.

Although reporting Mulberry’s report that in the 10 weeks ending June 1, sales were up 12% with comparable sales up only 3%. Its Fall/Winter wholesale orders are11% higher than a year ago, the company said.

“Within the 10 week period, April saw slower growth, but over the last six weeks UK full price sales have improved, up 21% like-for-like,” said Guillon. “However, we remain cautious as a result of the adverse macro-economic climate.”


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