British luxury house Mulberry has today announced the launch of another Asia business, this time in South Korea, as it revealed its latest numbers revealing a recent drop-off in UK like-for-like sales.
Following on from the formation of new subsidiaries in China, Japan, Hong Kong and Taiwan, it has formed another majority-owned joint venture to develop its business in South Korea.
The news comes as the business reveals revenue up 1% to £169.7m in the year ending 31 March 2018. Retail sales were up 3% with the UK “broadly flat” and international up 20%. Digital sales were up 14% and now account for 17% of group revenue.
Retail like-for-like sales, however, were down 7% for the 10 weeks to 2 June with international up 1% and the UK down 9%, reflecting a drop in tourism and footfall. CEO Thierry Andretta described UK trading conditions as “challenging”.
Profit before tax on existing business was up 36% at £11.3m, which was before start-up costs of £2m and a net operating expense of £2.4m relating to the establishment of the new Asia subsidiaries.
Andretta said of the decision to expand into South Korea: “Our international business is growing and following the completion of this set-up phase in Asia, we will focus on omni-channel, digital partnerships and marketing investment in the region.”
“Following another period of cash generation our balance sheet is strong. Although the UK market remains challenging, we will continue to invest in our strategy to develop Mulberry into a global luxury brand to deliver increased shareholder value,” Andretta added.
Fiona Cincotta, a senior market analyst at www.cityindex.co.uk, said the results “don’t look too bad, with profit only being dragged down by start-up costs associated with its promising Asian business”.
However she added that the recent performance of the UK business would “ring alarm bells”. “Like-for-like sales in Mulberry’s home market are down an eye-watering 9% in the first 10 weeks of its new financial year through March. One can presume this is partly due to a strengthening pound keeping tourists, and hence foreign buyers of its handbags, away. But it’s also an indication that Mulberry’s turnaround is very much a work in progress,” she said.
“Margins on handbag sales are up. But management is treading a fine line between maintaining the company’s luxury heritage, while not putting customers off with higher prices,” she said, in reference to the brand’s damaging strategy under previous CEO Bruno Guillon (who left the business in 2015) to raise its prices and move upmarket, something which Andretta is correcting.
Mulberry is also set to take the wraps off a new store on London’s Regent Street. The store occupies part of the space of the former Austin Reed store, at the Piccadilly Circus end of the premium shopping street.