Mulberry boss vows to ‘reprioritise and rebuild’ as losses widen

Mulberry’s new boss has said the handbag maker must ‘reprioritise and rebuild’ after the struggling fashion brand’s losses widened in the first half. 

The group has struggled over the past couple of years with subdued spending on luxury goods, especially in the UK and China, two of its biggest markets.

Its domestic retail revenue fell by 14 per cent to £31.2million in the six months ending September, while Chinese sales more than halved. 

Weaker orders from wholesale and franchise partners also pushed the London-listed firm’s overall turnover 19 per cent lower to £56.1million.

Gross margins slipped by around four percentage points to 66.5 per cent following price cuts and significant promotional activity to reduce stock levels.

Mulberry slumped to an underlying pre-tax loss of £15.7million for the first half, a £3million increase on the same period last year.

Troubles: Mulberry has struggled over the past couple of years with weaker luxury spending across many countries, especially the UK and China, two of its biggest markets

Mulberry Group shares fell 6.8 per cent to 110p on Tuesday morning, taking their losses over the past year to around 27 per cent.

‘The first half results illustrate the clear need to reprioritise and rebuild the business,’ said Andrea Baldo, chief executive of Mulberry.

‘In response to current market conditions, we have taken decisive steps to streamline operations, improve margins, reduce working capital, and strengthen our cash position.’

Mulberry’s woes are familiar to peers in the luxury sector such as Burberry, which has recently embarked on a turnaround plan of its own.  

Mulberry recently raised £10.75million in cash to bolster its balance sheet and give it sufficient financial flexibility to support a turnaround plan.

Alongside this, the company has expanded its debt facilities to £27.5million and is conducting a strategic review, which is due to conclude next month.

Baldo took over in September after running the Danish fashion brand Ganni for six years and the Italian group Coccinelle before that.

He replaced Thierry Andretta, who quit in July after nine years in charge of Mulberry, during which time the firm’s share price had plummeted by almost 90 per cent.

Baldo has already seen off an attempted takeover by Frasers Group, whose Burberry stake totals over 37 per cent.

Mike Ashley’s retail empire made two unsuccessful bids for the luxury group, with the second totalling £111million, before backing down after opposition from Challice Group, Mulberry’s largest shareholder.

Having rejected a takeover, Julie Palmer, partner at Begbies Traynor, said Mulberry ‘now needs to prove that it can pull off its plans to reshape the business and return to growth.

She further declared: ‘It is embarking on its long road to financial recovery against a troublesome backdrop in the UK that is characterised by volatile confidence and higher costs, so that will not make life any easier.’