Mulberry today said its digital business helped to shield it from Covid-19, although it still reported falling sales and widening losses in the first half of its financial year that led it to cut a quarter of its global workforce and close shops.
The luxury leather goods brand set out how it now plans to become a sustainable global brand, focusing on omnichannel distribution and growing its international presence while innovating and developing a sustainable lifecycle for its products.
Mulberry today reported sales of £48.9m in the six months to September 26. That’s down by 29% on the same time last year, and, says the retail brand reflects the impact of Covid-19 and the fact that 70% of its stores were closed from the beginning of its financial year, at the end of March. Digital sales of £23.4m were 68% up on the £13.9m it turned over online at the same time last year. It reported a pre-tax loss of £1.9m before one-off costs of £0.5m, mostly related to restructuring, took its bottom line pre-tax loss to £2.4m.
Mulberry sells online and, as at September 26, trades through 111 shops, including both those operated directly and those operated through franchise partners. The business, which makes and distributes its products from Somerset, was at first able to manage falling demand by reducing its inventory by 13% to £33.6m and furloughing store and production staff. During the half-year it went on to put in place a restructuring that meant 25% of its staff around the world were made redundant and eight of its stores closed, including four shops and a concession in the UK.
The retailer showed that while its digital sales grew by 68% to £23.4m in the first half of the year, sales in its stores fell by 55% to £19.4m. Digital growth helped protect sales but could not compensate for the close of its stores, and its overall omnichannel retail sales fell by 25% to £42.9m, while its wholesale and franchise sales fell by 49% to £6m. Digital accounted for 67% of sales in the first quarter of Mulberry’s financial year – when stores were mostly shut – and for 32% in the second quarter. Overall, its sales fell by 39% in the first quarter and by 18% in the second.
Mulberry chief executive Thierry Andretta said: “I am proud that in spite of the devastating effects of the global pandemic, we have made further progress on our long-term strategy to build Mulberry as a sustainable global luxury brand. This is focused around: a truly omni-channel network and market leading digital platform, increased presence in Asia, and a relentless focus on innovation and sustainability, offering our customers beautiful products, made to last in our Somerset factories.
“This strategy enabled us to withstand some of the pressures that we, and indeed the wider retail and hospitality sectors, have been faced with. In particular, using our market leading global digital network to replace retail sales with digital wherever possible, achieving high growth in China and Korea, and reacting quickly to flex our agile supply chain, enhancing market reactivity and reducing lead time, to match the increase in digital demand.
“In spite of all of these self-help measures, we cannot avoid the fact that the damage the coronavirus has caused to business, decimating high streets and the tourism industry, is severe. For this reason, in order to ensure that the business was able to navigate through this difficult time, we took the painful decision to implement a far-reaching cost reduction and optimisation programme. As we look to the future, we remain confident in our strategy and in the relevance and durability of the Mulberry brand.”
Mulberry also introduced global pricing during the year, ensuring that its goods would be sold for the same price, wherever they are sold.
The brand launched a new Mini Iris handbag on Tmall in September, supported by an influencer campaign and livestream. It is also “working with new and existing digital media partners to reach younger audiences and drive new customer growth on our digital platforms”.
Looking ahead, Mulberry is now focused on creating a luxury experience for its customers, however they choose to shop, enabling them to research, buy and return from stores or online. Its new-look stores include digital technology that has helped it to offer virtual appointments while supporting its digital business.
Sales in the Asia Pacific region grew by 28% during the period, including the Chinese (+75%), and South Korean (+35%) markets, although sales were down in Japan (-26%). This helped to offset falling sales in markets where stores remained closed. Mulberry expects that international revenues will account for a growing proportion of its sales.
The retailer is investing in an agile supply chain, as it looks to reduce lead times in response to growing digital demand. It is working to develop goods that are made to last, with lifetime repairs and sustainable materials, packaging and distribution - as this emerges “as a key focus for all our customers”.
Mulberry is a Top250 retailer in RXUK Top500 research.