TIDMMUL
RNS Number : 7932Y
Mulberry Group PLC
04 December 2014
MULBERRY GROUP PLC ("Mulberry" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014
Mulberry Group plc, the English luxury brand, announces its
results for the six months ended 30 September 2014.
GODFREY DAVIS, CHAIRMAN, COMMENTED:
"The results for the six months to 30 September 2014 are in line
with the guidance given on 14 October.
We have continued to take steps to return the business to growth
and sales for the nine weeks to 29 November are encouraging. Total
retail sales are up 8% compared to last year, including online
sales, +18%.
We have worked hard to re-engage with our customers and our
tongue in cheek Christmas video #WinChristmas has been viewed well
over one million times.
After a difficult couple of years, the steps that we have taken
to return Mulberry to growth are beginning to bear fruit and
looking further forward, we expect to gain further momentum from
the appointment of Johnny Coca as our new Creative Director."
FINANCIAL HIGHLIGHTS
-- As reported on 14 October 2014, total H1 revenue declined 17% to GBP64.7
million (2013: GBP78.1 million)
-- Retail revenue was down by 9% to GBP45.1 million
-- Wholesale revenue was down 31% to GBP19.6 million
-- Gross margin was 59.9% as expected (2013: 63.0%), reflecting in part
the impact of the new factory as its production efficiency increases
-- Loss before tax of GBP1.1 million (2013: GBP7.2 million profit) in
line with expectations, reflecting lower sales, the increase in costs
associated with new stores opened this year and last year (GBP2.8 million)
and the lower gross margin
OPERATING HIGHLIGHTS
-- Successful launch of the Tessie and Cara Delevingne bag families
-- Two new directly operated international stores opened during H1 (Las
Vegas, Hamburg)
-- Click & Collect service introduced for full price standalone stores
in the UK
CURRENT TRADING AND OUTLOOK
-- Retail revenue up 8% for the nine weeks to 29 November 2014, driven
by a strong performance by our online business (+18%)
-- Three further directly operated international stores opened since 30
September 2014 (Dallas, Frankfurt, Paris)
-- New Creative Director, Johnny Coca, to join Mulberry during July 2015
Whilst the progressive improvement in Retail and online sales
trends is encouraging, the next few weeks trading through Christmas
and into January are very important to the full year result.
FOR FURTHER DETAILS PLEASE CONTACT:
Bell Pottinger
Daniel de Belder / Joanna Boon 07977 927142 / 020 3772 2499
Mulberry Investor Relations
Allegra Perry 020 7605 6795
Altium
Ben Thorne 020 7484 4040
Barclays
Marcus Jackson / Nicola Tennent 020 7623 2323 / 020 3134 8370
FINANCIAL REVIEW
As explained in the trading update on 14 October, total revenue
for the six months to 30 September 2014 was GBP64.7 million, down
17% from GBP78.1 million.
Retail
The Retail business declined 9% to GBP45.1 million (2013:
GBP49.5 million) with like-for-like sales down 13%. Growth in our
international business was more than offset by a decline in the
UK.
-- UK Retail sales (excluding online) were down 16% to GBP31.0 million,
with our full price stores affected by a decline in footfall, particularly
tourist shoppers (down 12% to GBP20.9 million) and our outlet stores
continuing to normalise from unusually high levels in the prior year
(down 23% to GBP10.1 million);
-- International Retail sales (excluding online) were up 20% to GBP7.5
million (2013: GBP6.3 million), reflecting the impact of new stores;
and
-- Online sales were up 1% to GBP6.6 million, representing 10% of Group
sales (2013: 8%).
As shown in the table at the end of this announcement, sales
trends are progressively improving as new product is
introduced.
Wholesale
Wholesale sales declined by 31% to GBP19.6 million (2013:
GBP28.6 million), reflecting a combination of inventory reduction
and conservative ordering by our Asian and European partners.
Financial
Gross margin was 59.9% for the six months to 30 September 2014
(2013: 63.0%). This reduction reflects the fact that selling prices
were not increased during the period and competitively priced new
product was introduced. In addition, the new factory in Somerset
reduced manufacturing margins as it was still in the training phase
after opening during June 2013.
Net operating expenses for the period decreased by GBP2.2
million to GBP40.0 million (2013: GBP42.2 million). This reflects
GBP2.8 million additional costs related to new directly operated
stores, which were more than offset by lower variable costs and
savings elsewhere in the business.
With a greater proportion of sales derived from the Retail
business, the Group's profit stream has become increasingly
weighted towards the second half of our financial year due to the
important Christmas trading period. As a result of this increased
seasonality and our inherent operational leverage, the lower sales
during H1 generated a loss before tax of GBP1.1 million (2013:
GBP7.2 million profit).
The effective tax rate for the year is expected to be 63.0%
(year ended 31 March 2014: 38.6%). This rate has been applied to
the half year results, resulting in a tax credit which will unwind
over the next six months as the Group generates profits. The rate
has increased primarily as a consequence of the unrelieved overseas
tax losses being a greater proportion of the expected Group profit
for the year.
Capital and investment expenditure for the period was GBP12.0
million, up from GBP10.7 million last year, of which GBP7.3 million
related to the acquisition of the company which owns the property
rights to our new Paris flagship store (due to open during April
2015) and GBP4.5 million related to stores.
Inventories have increased to GBP39.3 million from GBP33.4
million at the same time last year due to the lower than planned
sales performance, the higher level of raw materials and work in
progress needed for the second factory and the higher number of
directly operated stores. At 30 September 2014, the Group had net
cash of GBP3.6 million (2013: GBP11.1 million).
OPERATING REVIEW
Product
Re-invigorating our product offering has been a top priority and
we continue to introduce new product across the complete price
spectrum. Following the successful launch of the Tessie and Cara
Delevingne bag families, the first products from our Spring Summer
2015 collections arrived in our stores during November which
include the new Blossom tote, the mini Lily and an enhanced range
of small leather goods. The customer response to these products has
been encouraging.
Brand and Marketing
Alongside our product initiatives, we have worked hard to
re-engage with our customers by reinforcing our core brand
values.
We continue to use digital marketing in innovative ways to
connect with our customers. Our tongue in cheek Christmas video
#WinChristmas, with well over one million views, is a good example
of how we are marketing the brand in a cost effective and uniquely
British way.
We have implemented a sophisticated CRM application which will
enable us to gain a deeper insight into our customers' behaviour
and better service their needs.
Distribution
Our distribution strategy is to build the business
internationally with strategically-placed stores complemented by a
strong digital presence and selective relationships with
multi-brand retailers. During H1 we opened two directly operated
stores in Las Vegas and Hamburg and opened two partner stores in
Bangkok and Dubai. We also closed a total of five partner stores in
South Korea, one in Hong Kong and one in Bahrain in line with our
plans to optimise our distribution platform in those markets. This
brings Mulberry's global store footprint to 120 stores at 30
September 2014, including directly operated and partner stores.
Operations
During the six months to 30 September 2014 we have continued to
invest in new stores, factory capacity in the UK and IT systems.
Two important IT projects were a focus for the period:
-- We have completed the roll-out of a new EPOS system into our own stores
which allows better inventory control and supports the new CRM application;
and
-- We have implemented the first phase of an omni-channel project for
our UK full price stores which includes in-store online ordering, in-store
collection of online orders (Click & Collect) and in-store online returns.
The omni-channel service will be progressively enhanced.
CURRENT TRADING AND OUTLOOK
During the nine weeks to 29 November 2014, total Retail sales
were up 8% compared to the same period last year (like-for-like
+2%).
UK full price sales (excluding online) were up 2% with
like-for-like +5%.
UK outlet performance improved by +6% (like-for like down 9%)
but remained volatile, as sales in this channel continue to
normalise after unusually high levels in the prior year period. The
annual UK sample sale has returned to its normal date during
November this year compared to March last financial year, adding
GBP0.9 million to outlet sales during the nine week period.
International Retail sales (excluding online) rose by 23% during
the nine weeks to 29 November 2014 (like-for-like +1%).
Online sales were up 18% during the nine week period,
benefitting from the investment in our digital platform over the
last two years.
Whilst the progressive improvement in Retail and online sales
trends is encouraging, the next few weeks trading through Christmas
and into January are very important to the full year result.
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