Mulberry today said its omnichannel approach to selling and its focus on digital and on sustainability had helped it to withstand the worst of the global Covid-19 pandemic, and that these will also be the basis for success in the future. That said, Mulberry today reported 10% fall in full-year sales and a £47.9m pre-tax loss in the year to March 28. In July, it made a quarter of its staff around the world redundant in response to Covid-19 lockdowns that meant both domestic and tourist shoppers were staying at home. Mulberry says that without the UK furlough scheme, it would have had to make deeper cuts sooner.
Changing luxury shopping habits
Mulberry’s city centre shops continue to be particularly affected by the absence of office workers and visitors – and it says it is “clear that tourism in London and other capital cities will be non-existent for the foreseeable future and that offices in the main cities will remain closed”.
Instead, it sees luxury shoppers now more likely to buy online both as consumer confidence grows an as it has improved in digital platforms by improving functionality, localisation and local fulfilment. “Digital traffic increased in many markets as a result of our digital and social channel marketing activities, and customer database growth was up on the previous period across all key countries and regions,” it said in today’s results.
Mulberry’s digital business has continued to grow throughout the pandemic. The retailer opened an off-price website to replace its outlet shop, while its distribution centre was big enough to continue to operate in a Covid-secure way throughout the pandemic.
The retailer, ranked Top250 in RXUK Top500 research, says it is now carbon neutral across its UK operations. Its first 100% sustainable leather bag, The Portfobello, sold out online within 24 hours of release. The retailer has now re-started manufacturing in Somerset in order to meet demand for its products. In the current year, sales are expected to remain low but losses should be reduced.
The update came as Mulberry reported revenue of £149.3m in the year to March 28 2020. That’s down by 10% from £166.3m in the previous year. Of that, sales worth £135.4m (2019: £146m) were made directly to consumers. The total was down from £146m a year earlier, but accounted for 91% of sales, where the previous year 88% of sales were direct-to-consumer. Almost a quarter (24%) of sales were digital, up from 22% a year earlier. Pre-tax losses grew to £47.9m, after one-off costs of £33.7m mostly related to writing down assets in the light of Covid-19, from a loss of £5m a year earlier.
Mulberry said the fall in sales reflected a “challenging” UK market and the impact of Covid-19 towards the end of the period. Before Covid-19 started, group revenue was already 6% down on the previous year in a “challenging” period affected by falling consumer confidence and Brexit uncertainty, while the temporary closure of Mulberry stores around the world from mid-January onwards – rising to 70% by mid-March – further hit sales. Full-year international sales grew by 4% over the year to £32.4m, to account for 26% of retail sales. During the year the retail brand introduced a new Mulberry concept to 28 shops, including eight operated by partners, and said that had driven “a significant lift” in sales per square foot.
Looking ahead
In the current financial year, Mulberry reports group revenue down by 29% in the half-year from March 29 to September 26 on the same time last year. Within that, digital revenue is up by 69% and retail revenue from the Asia Pacific region up by 27% – apparently as a result of a new global pricing strategy that sees its goods sold for the same prices around the world. Mulberry says it has seen an “improving trend” in sales since its stores have re-opened.
Mulberry chief executive Thierry Andretta said the group had made “strategic and operational progress during the most challenging market conditions in the history of the brand.”
He said Mulberry had been on track for a second-half pre-tax in the second half of the year, thanks to a four-pillar growth strategy including omnichannel distribution, international development in Asia, and a focus both on innovation and sustainability, and that this approach had helped it to withstand some of the pressures of the year.
He said: “Post-year end, the group has continued to benefit from its long-term strategic focus with initial sales ahead of our early expectations. However, we cannot escape the reality that British luxury and UK cities face a very uncertain future, hampered by necessary but dramatic social distancing measures and alarmingly low levels of footfall, as well as the pressures of high rents and business rates and the upcoming changes to tax-free shopping.
“We cannot control external events but we have a clear strategy and remain confident in the strength of the Mulberry brand.”
Sustainability strategy
In 2020, Mulberry achieved zero waste to landfill certification and offset its full carbon footprint by planting 26,700 sq m of woodland in the UK via The Woodland Trust. More than 50% of its bags are made in the UK, and its global manufacturing partners must also follow strict ethical and environmental standards, with more than 65% of leather soured from environmentally accredited tanneries. It has a circular approach to manufacturing and has a repairs centre that mends thousands of bags a year. Customers can buy and sell secondhand Mulberry bags via The Mulberry Exchange.
Mulberry trades online via its own website and via partners including Tmall and Farfetch, and, as of March 28, via 119 shops around the world, including 99 directly operated shops, of which 54 are in the UK.
