Mulberry achieve profits quadruple after global luxury sales
Friday, June 17, 2011 by Admin
British luxury brand Mulberry is expanding its Somerset factory after runaway demand for its Alexa and Bayswater handbags saw annual profits more than quadruple.
Like the satchel it named after TV presenter Alexa Chung, the company shares are in vogue, soaring from £2 a year ago to break through the £16 barrier last month. The better than expected profits of £23.3m sent the shares up more than 8%, to finish up 115p at £14.50.
Like the satchel it named after TV presenter Alexa Chung, the company shares are in vogue, soaring from £2 a year ago to break through the £16 barrier last month. The better than expected profits of £23.3m sent the shares up more than 8%, to finish up 115p at £14.50.
With UK like-for-like sales running 33% of last year's levels, chairman Godfrey Davis said the brand was striking a chord with shoppers: "People are getting more concerned about disposable fashion and Mulberry is not a throwaway brand."
He put the jump in profits – which were just £5.1m a year ago – down to the company reaching "critical mass". Sales were up 69% to £122m in the year to 31 March.
Mulberry, founded by Roger Saul in 1971 with £500 he received on his 21st birthday, has been the sleeper success of the luxury goods sector. What was once a frumpy brand favoured by the green welly brigade has been reinvented over the past decade as a glamorous label attracting film stars such as Kirsten Dunst and Rebecca Hall to the front row of its fashion shows.
It has won new fans by updating its most popular handbag styles, with the current collection carrying its classic Bayswater in pink metallic tiger stripes. Its most recent new "bag family" is the Taylor and has been well received, said Davis.
The first Mulberry products were leather belts made by Saul in an old forge in the garden of his parents' house near Bath, and much of the brand's heritage relates to the south-west and the Rookery, its factory at Chilcompton, Somerset, which opened in 1973. Davis said construction work to extend the factory was well advanced and expected to be finished by August. New space will enable it to increase UK production by 30%.
Mulberry's first Beijing store opened in January and is already trading profitably. Like Burberry, which posted a near 40% rise in profits last month, Mulberry is benefiting from the resurgent demand for luxury goods market after the two-year slump following the financial crisis. While the high street remains in the doldrums, sales of designer clothes, watches and handbags are expected to reach a new high of £165bn this year largely as a result of insatiable demand for western luxury brands from wealthy Chinese shoppers.
After several years of losses, Saul was ousted in 2002 in a boardroom coup led by Mulberry's largest shareholder, Christina Ong. The Singaporean billionaire is a major distributor of luxury brands in Asia.
Half of Mulberry's 86 shops and department store concessions are in Britain but the company will embark on an overseas push this year with shops set to open in South Korea, Germany, Switzerland and Austria. Davis predicts that within two years international sales will overtake the domestic market. Mulberry has also been well received in the US, where a new store in New York's fashionable Soho district will be followed by outlets in Los Angeles and San Francisco.
"This could be just the beginning of the Mulberry story given the limited footprint held in many of the largest luxury goods markets outside the UK," said John Cummins, analyst at its house broker Altium.
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