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Mulberry Profits Fall 35% in Fiscal H1

The company cited a slowdown in Asian demand and higher operating costs.

Mulberry RTW Spring 2013

LONDON — After a trying first half, the tide seems to be turning for Mulberry, which warned in October that sales and profits would fall short of market expectations.

This story first appeared in the December 7, 2012 issue of WWD.  Subscribe Today.

On Thursday, the company said profits declined 35 percent to 7.3 million pounds, or $11.6 million, in the six months to Sept. 30.

The decline was due to higher operating costs as Mulberry upgrades its distribution network, more cautious ordering from its Asian franchise partners due to a slowdown in demand and tough comparative sales.

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Revenue in the period rose 5.6 percent to 76.5 million pounds, or $120.9 million, on the back of increased U.K. and international retail sales. All figures have been calculated at average exchange rates for the six months.

The second half is off to a solid start: The company said retail revenue climbed 19 percent in the first nine weeks to Dec. 1, with same-store sales up 11 percent.

Bruno Guillon, Mulberry’s new chief executive officer, said the downturn in profits is part of a bigger strategic story.

“Our big challenge is turning Mulberry into a global luxury brand, a global success story,” he said. “It’s been a fantastic success story in the U.K. and we need to attract new customers without losing the existing ones. And we are working on building sustainable, long-term growth. Our challenge is how to remain an English brand but still be understandable to the Chinese, German and American customers.”

Part of that work, he said, has involved “rationalizing the wholesale network, because it has to be consistent with our retail stores — some of our partners were just not in line with our strategy, but we have some very good wholesale accounts such as Selfridges, Le Printemps and Le Bon Marché.”

He said the wholesale cull was an ongoing process and, “I hope I don’t have to do too much more in the future. In the end, our strategy is all about consistency, quality and defending the brand.”

Mulberry has also upgraded its outlet business and is no longer making product specifically for outlet stores, which has impacted financial performance in the short term.

Guillon, who was formerly managing director of Hermès France, said Mulberry’s retail expansion was on track, with a total of 17 to 20 new stores planned for the current fiscal year, and “around 20 store openings” planned each year for the next four to five years.

So far this year, stores have opened in markets including Singapore, San Francisco, Zurich and Berlin.