Profits at the British handbag maker Mulberry have recovered after it cut prices and spruced up its ranges to win back customers.
Mulberry’s efforts to become a more affordable luxury brand appear to be paying off, following a disastrous move upmarket in recent years. It now intends to open more factories in the UK as revenues rise.
Profits before tax rose to £6.2m in the year to 31 March, from £1.9m the previous year. Retail sales climbed 8% to £118.7m while wholesale revenues dipped slightly to £37.2m from £38.8m.
Like-for-like sales were up 8% last year but growth has slowed in the 11 weeks to 11 June, to 4%. Many luxury retailers are struggling, such as Burberry, Giorgio Armani and Hugo Boss, as demand has suffered as a result of the economic slowdown in China.
Mulberry said the first collection from its new creative director, Johnny Coca, who was recruited from Céline, at London fashion week in February had been well received by the press and the company’s partners. It started arriving in shops in April and the whole collection will be in stores by August.
The Somerset-based firm said 70% of its handbags were priced between £500 and £995, compared with less than half in 2014. They include the bestselling Bayswater and the Lily, named after model Lily Cole. Mulberry has brought the style and pricing of shoes and ready-to-wear collections into line with bags.
The firm has pushed through production efficiencies at its factories in Chilcompton and Bridgwater, which produce half of its handbags. As they are close to capacity, there are plans to open a third factory in Britain. “The brand’s British DNA is emphasised as a point of distinction,” Mulberry said.
The company opened a new flagship store in Paris last year, replacing a smaller one, and closed three stores in the US. It plans to open fewer stores in coming years to focus on improving shops and its digital business.
Digital sales rose 19% to £21.4m last year, boosted by a website upgrade and improved delivery. They now account for 14% of group sales, compared with 12% in 2015 and 10% in 2014. About half of this comes from mobile phones and tablets.
Nivindya Sharma, senior analyst at consultancy Verdict Retail, said: “There is much more potential for growth especially as Mulberry plans to extend its digital offer into key international markets through local language websites and local fulfilment over the next few years.”
She said with Coca’s efforts to modernise the brand while respecting its heritage, Mulberry was on its way to regaining its trademark “classic but cool” credentials.
“Mulberry has made significant progress during the last financial year with solid growth achieved in revenues and profit,” said Thierry Andretta, the chief executive.
“Our UK manufacturing base has remained a core strength and point of distinction. We have built a strong foundation for future growth as a result of the investment made in product design and development as well as our omni-channel infrastructure.”
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