Mulberry to 'streamline operations' as losses widen

Luxury handbag maker Mulberry said on Tuesday that it was taking steps to "streamline operations" as it reported a 19% drop in first-half revenue and a widening of its losses, pointing to a "difficult" trading environment.

In the 26 weeks to 28 September, group revenue fell to £56.1m from £69.7m in the same period a year earlier. UK retail sales declined 14% to £31.3m, while Asia Pacific saw a 31% drop to £9.3m.

Total international retail sales were down 17% to £19.5m, with a reduction in Asia Pacific partially offset by a 2% increase in the Rest of World.

The underlying pre-tax loss widened to £15.3m from £12.3m and the reported pre-tax loss widened to £15.7m from £12.8m.

Mulberry said trading during the period was "challenging" as the previously highlighted difficult trading environment and uncertain macroeconomic trends continued to impact the group.

In the UK - its largest market - the company said trading continued to be affected by low consumer confidence. In Asia Pacific, meanwhile, it pointed to a continued challenging macroeconomic climate in China and South Korea, with retail sales down 52% and 29% respectively.

Chief executive Andrea Baldo said: "Though I've only been in the role of CEO for under three months, the first half results illustrate the clear need to reprioritise and rebuild the business. Mulberry is an iconic brand. It stands out for its rich heritage and craftsmanship - qualities that our customers recognise and value deeply.

"Combined with our unique position in the market, offering responsible luxury products of unmatched quality and longevity, crafted in our Somerset factories, Mulberry truly is one of a kind. We are now working on initiatives to renew the brand's relevance, initially for UK consumers and then for our international audience.

"In response to current market conditions, we have taken decisive steps to streamline operations, improve margins, reduce working capital, and strengthen our cash position. This has also meant reviewing our internal team structure to ensure we become a leaner, more agile organisation. Additionally, we've made strategic adjustments to our product, pricing, and distribution strategies, and we've begun discussions with luxury wholesale partners to ensure we are present wherever our customers shop."

Last month, Mike Ashley’s Frasers Group said it was abandoning its pursuit of Mulberry after it rejected a second takeover proposal of £111m, or 150p a share, saying it was "untenable".

Mulberry’s rejection of the offer - up from a previous proposal of 130p a share - came after major shareholder Challice said it had no intention of selling its 56% stake to Frasers.

Kathleen Brooks, research director at XTB, said: "The company cited challenging macro conditions, which cannot be denied. However, these results will surely give Mike Ashley more ammunition to try and get his hands on this iconic brand."

Russ Mould, investment director at AJ Bell, said: "Frasers was right when it implied that Mulberry was in a mess. The luxury goods company’s half-year results show losses getting bigger, margins falling, sales down in all regions and an outlook statement soured by the words ‘uncertainty’ and ‘challenges’.

"The new boss Andrea Baldo isn’t blind to the problems. His response is to cut costs, make the company more efficient, improve margins and rebuild the company’s financial strength. Those things won’t happen overnight. It’s now a waiting game to see if new life can be breathed into the business."