LONDON — Mulberry Group is in growth mode — and paying the price of expansion.
On Thursday, Mulberry reported a fall in first-half profits to 5.1 million pounds, or $8 million, from 7.3 million pounds, or $11.4 million, due to the costs of international expansion and the timing of the brand’s seasonal deliveries to its retail outlets.
Revenues in the six months to Sept. 30 climbed 2.1 percent to 78.1 million pounds, or $121.8 million, with retail sales advancing 6 percent, boosted partly by international store openings.
Wholesale revenue was down 5 percent as a result of “more conservative ordering” by European customers.
Dollar figures have been converted at average exchange for the six-month period.
Bruno Guillon, the company’s chief executive officer, said that in the nine weeks to Nov. 30, retail revenues were up 3 percent, with international retail sales advancing 49 percent, and wholesale trends expected to continue due to “cautious ordering.”
The company also said that profits would be weighted toward the second half, due to the increased percentage of sales generated through retail stores and “the important Christmas trading period.”
Guillon said the hunt for a new creative director to succeed Emma Hill is ongoing, and an appointment will be made as soon as possible. Mulberry will not stage a runway show in February for its fall 2014 collection.
“We are looking for someone with a vision, talent and international credibility, someone who understands the DNA of the brand. We are ambitious, and want this person to help take us to the next stage of growth,” he said.
International expansion is on track, with 15 new stores planned for the full year, nine of which have already opened.
“We have recently secured a location for a flagship store in a prime location on Rue Saint-Honoré [in] Paris, which is scheduled to open during 2014-15. Located in a key tourist destination, this store will generate global visibility for the Mulberry brand,” Guillon said.
Mulberry also said it is facing increased competition from midmarket brands, which has had an impact on sales of its entry-price handbags.
“We are taking steps to address this challenge,” said Guillon, adding that “all luxury businesses” were having to face the challenge of lower-priced competitors in the accessories arena.
He said that, as a result, Mulberry is “reinforcing” its offer of bags priced from 600 pounds, or $983, to 1,000 pounds, or $1,638, and introducing new bags that range in price from 1,000 pounds to 1,500 pounds, or $2,456. He said customers are responding well to the new offer.
Guillon said raising the price points means that entry-price customers will be inclined to “stay with the brand” instead of looking elsewhere once they are in a position to spend more money.
He added that the company would increasingly emphasize its Made in Britain credentials: In the first half, Mulberry completed the construction of its new Somerset factory on time, and is currently training new staff. The factory is already in production and is expected to be at full capacity by mid-2014, allowing Mulberry to achieve its target of making 50 percent of its handbags in England for fall 2014.
He also said men’s was an increasingly important business, and had grown from 8 percent of sales to 13 percent of sales since his arrival last year.