Mulberry incurs loss in first half due to weak pound

Mulberry, the luxury English fashion brand, reported a loss for the first half despite a rise in sales, due to higher investment and the depreciation of sterling pushing up input costs.

Revenue was up 10% to £74.5m for the six months ended 30 September 2016.

The group recorded a loss before tax of £0.5m for the period, down from a profit before tax of £0.1m in the first half of 2015. This was due to increased product investment and additional foreign exchange costs on overseas subsidiaries of around £0.4m.

Total operating expenses increased to £44.9m, up from £43m in 2015 due to higher retail costs of £1.4m and increased product development costs of £1m.

During the period, sterling weakened significantly resulting in higher input costs to UK production and higher running costs of overseas subsidiaries. On the plus side, the group's London stores have benefitted from higher tourist spending.

Capital expenditure for the period was £1.9m, including £1.2m related to stores and £0.5m to investment in the Digital platform and IT systems.

Retail sales were up 10% to £55.4m with UK retail sales up 12% at £45m and international retail sales up 2% at £10.5m.

Global digital sales were up 32% accounting for 14% of group sales, up from 12% in 2015.

Inventory reduced to £43.7m from £47.7m through strategic initiative.

The group’s cash balance also improved at £11.3m by the end of the period, up from £4.1m in 2015.

The board’s international development strategy progressed with the creation of majority-owned new businesses across China, Hong Kong and Taiwan.

Looking ahead, the group anticipates additional costs of around £1m for the full year to 31 March 2017 due to foreign exchange movements and an additional £2m for strategic investments into North Asia.

Chief executive Thierry Andretta said: "Mulberry's new collection under the creative direction of Johnny Coca has been well received by our existing customers and a new audience. We have strengthened our balance sheet with tight inventory management leading to strong cash generation, enabling us to invest in international development and new products. The new business announced today in North Asia will progress our strategy of developing our retail and omni-channel model in key luxury markets."

The share price was flat at 1,100p at 1024 GMT on Thursday.