LONDON— Profits at Mulberry Group dropped 26 percent to 18.7 million pounds, or $29.5 million, in the year ended March 31, on the back of broadly flat sales and costs related to new store openings and a contraction in gross margin.
As reported, sales in the period dipped 2 percent to 165.1 million pounds, or $260.9 million, with retail revenue up 8 percent and wholesale revenue down 16 percent, as the company pursues a strategy of opening directly-operated stores and culling certain wholesale accounts.
Dollar figures have been converted at average exchange rates for the 12-month period.
"Mulberry ended the year in line with the guidance given in March," said Bruno Guillon, the company's chief executive. Over the past 12 months, Mulberry has issued two profit warnings.
"After three years of rapid growth, we have had a year of consolidation during which we have laid the foundations for the transition of Mulberry from a U.K. success story into a global luxury brand. In particular we are increasing U.K. production and enhancing both our retail experience and product range," Guillon said.
The executive added that more than 80 percent of sales currently come from the U.K. and Europe, where the economic climate remains difficult. "Mulberry's challenge for the future is to accelerate our brand awareness in the U.S.A. and Asia. Greater visibility in Asia will allow us to benefit from tourist traffic in Europe and the U.S.A. at the same time as growing our business locally," he said.
The reduction in gross margin, he noted, was due to product-related overheads and higher raw material costs, which were not reflected in prices until last November.
Guillon said that current trading was positive, with retail revenue up 9 percent in the 10 weeks to June 8, and same-store sales advancing 6 percent. "Modest growth" is expected for wholesale sales this year, while 15 to 20 new stores are set to open in the current year.
As reported earlier this week, the brand's creative director Emma Hill is leaving the company. Guillon said the spring 2014 collection has been completed, and Hill continues to work in the business and on the collection for its runway show, which will take place on Sept. 15 during London Fashion Week. The timing of her departure is currently under discussion and has yet to be finalized.
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