After three years of rapid growth, Mulberry (MUL) has had a "year of consolidation", chief executive Bruno Guillon explained as the British handbag maker reported a widely expected drop in both sales and profit. With more than 80 per cent of revenue generated in the economically paralysed UK and Europe, he says Mulberry's challenge is to accelerate brand awareness further afield, particularly in Asia.
Indeed, cautious reordering from Asian franchise partners and European account rationalisation sent wholesale revenue tumbling 16 per cent to £57.9m, offsetting an 8 per cent rise in retail sales. Underlying revenue growth of 6 per cent on the retail side was still a decent performance considering it followed a 36 per cent increase in the previous 12-month period. However, a challenging economic backdrop coupled with a decline in tourist spending in the London stores held back growth rates. Unfortunately, the soft trading came at a time when the business was ramping up capital expenditure, spending £8.8m on stores, £4.4m on factories and £2.9m on IT systems.
So, with gross profit margins down almost 3 percentage points to 63.3 per cent, partly reflecting higher raw material prices, and operating expenses rising due to £6.3m of additional expenditure on company owned stores overseas, operating profits were hit hard. The hope is that growth in Asia, where Mulberry's market share relative to other luxury brands is tiny, will boost tourist trading in the UK and Europe. The company opened 17 new stores in the financial year, in line with an annual target of around 15-20 openings.
Construction of a second UK factory was completed on 3 June, while news that creative director Emma Hill is to leave was a surprise, given her key role in designing Mulberry's strategy to upscale and focus the brand.
Panmure Gordon expects EPS of 35p in 2014, but has trimmed its 2015 forecast from 42p to 38p (from 32p in 2013).
| MULBERRY (MUL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 933p | MARKET VALUE: | £558m | |
| TOUCH: | 931-934p | 12-MONTH HIGH: | 2,141p | LOW: 870p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 132p | NET CASH: | £21.9m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 59 | 4.2 | 4.5 | 2.00 |
| 2010 | 72 | 5.1 | 5.2 | 2.20 |
| 2011 | 122 | 23.3 | 29.8 | 4.00 |
| 2012 | 168 | 36.0 | 43.9 | 5.00 |
| 2013 | 165 | 26.0 | 32.2 | 5.00 |
| % change | -2 | -28 | -27 | - |
Ex-div: 14 Aug Payment: 9 Sep | ||||
