Mulberry lambasts UK tax policy

Commenting on his maiden set of full-year figures as Mulberry’s (MUL) chairman, Christopher Roberts, said that the board “must remain mindful of the external climate and ongoing sector headwinds including high inflation”. This sober injunction accompanied news that the luxury goods manufacturer had cut the full-year distribution by two-thirds.

The share price hardly budged for most of the day, which is hardly surprising given the dominance of Singapore’s Ong family and Frasers Group (FRAS) on the share register, but a late sell-off saw it close down 9 per cent. 

Reported profits took a steep fall, but they’re in much better shape once you strip out the influence of non-cash items and software-as-a-service development costs. The gross margin contracted by 50 basis points, but it remains in rude health at 71.2 per cent. Importantly, management was able to increase the proportion of full-price retail sales, a possible pointer to the resilience of luxury goods markets when discretionary spending budgets are under pressure.

The most noteworthy advance was in international sales, up by 12 per cent to £46.5mn. Asia Pacific sales were 3 per cent to the good at £28.9mn, although the region was in the grip of the pandemic for longer than western markets. China is now a key focus for investors in luxury goods brands now that it has thrown off its pandemic restrictions.  

UK retail sales of £87.7mn were slightly down on the prior year, although they improved over the second half. Unsurprisingly, management reiterated its criticism of the UK tax regime, specifically the negative impact of the loss of VAT-free shopping on Mulberry’s UK performance. The company is not a lone voice on this score. Hold.

Last IC view: Hold, 253p, 1 Dec 2022