Mulberry Sees China Business Rebounding as Lockdowns Lift
LONDON — Mulberry chief executive officer Thierry Andretta is bullish about the brand’s future in China despite a bumpy start to the new fiscal year.
In the first 12 weeks, retail and digital revenue at the British brand was down 1 percent due to COVID-19 restrictions in mainland China. The majority of Mulberry‘s stores were shut, as was the brand’s Shanghai distribution center.
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“We were struggling at the beginning, but I’m confident about China: the government is doing everything it can to encourage business. Many of our stores have reopened, traffic is getting better, and the digital business is back to normal. I’m positive. We are growing in China,” Andretta said.
It isn’t just China, which represents around 10 percent of sales, that’s boosting Andretta’s mood. The growth and sustainability strategies that he’s been putting in place over the past five years, and during the pandemic, have been paying off.
In fiscal 2022 profits more than quadrupled, while sales were up nearly 33 percent. Overall group revenue for the first 12 weeks of the new year was 5 percent ahead of 2022, supported by the wholesale business, which was up 29 percent.
In the 53 weeks ended April 2, revenue rose to 152.4 million pounds, while profit was 19.2 million pounds, including a one-off gain of 5.7 million pounds from the disposal of its Paris lease.
Andretta added that while the economic and geopolitical outlook “remains uncertain,” Mulberry has a clear strategy “for future profitable, cash-generative growth.”
Mulberry’s shares rose 8.1 percent to 3.19 pounds in early-morning trading on Wednesday, and settled down during the day, closing up 1.7 percent at 3 pounds.
Mulberry’s pandemic years were not easy: The British brand laid off staff, shut stores and factories, bid farewell to its designer Johnny Coca and shelved its footwear and ready-to-wear collections as part of a major restructuring.
At the same time, Andretta fashioned a new strategy, putting the focus on high-end handbags made from green materials, accenting the online channel, moving away from sales and promotions and setting a universal pricing policy in a bid to be as transparent as possible with customers.
Discussing the results on Wednesday, he said the company had made great strides in its mission to be “the leading responsible British lifestyle brand, and a pioneer in sustainability.”
He described Mulberry products as “made to last with the highest quality, lowest carbon materials in our U.K. factories.”
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In fiscal 2022, U.K. retail sales increased 36 percent to 89.8 million pounds.
China retail sales rose 59 percent, while retail sales in South Korea rose 11 percent, contributing to an overall 28 percent increase in Asia Pacific. International retail sales increased 20 percent to 40.4 million pounds in the 12 months.
During the period, five new stores opened in China, and four in South Korea, and Mulberry flagged its “ongoing growth and development” in the Asia Pacific region.
In the last 12 months, digital sales fell to 47.5 million pounds from 56.4 million pounds, reflecting customers’ decisions to return to physical stores. Overall, digital sales were up 31 percent compared to pre-COVID-19 levels.
The board is proposing a final dividend of 3 pence per ordinary share, compared with zero dividend last year.
The company said the past year also saw improved margins due to a strategic focus on full-price sales and increased volume efficiencies. It added that the business and infrastructure has “responded well” to increased demand following the easing of COVID-19 restrictions.
As reported last year, Mulberry launched The Lowest Carbon collection, which is made from the world’s lowest-carbon leather, using a local and transparent supply chain. It is Mulberry’s first capsule collection of regenerative “farm to finished product,” and the fruit of the brand’s Made to Last manifesto.
Andretta said Mulberry continues to challenge itself to be more sustainable, and transparent.
Earlier this month, the company said it planned to introduce Digital IDs to its leather goods products, starting with all vintage pre-loved bags.
As a member of the Sustainable Markets Initiative Fashion Task Force, Mulberry wants to roll out the technology to all pre-loved products by this fall, and across the wider business by 2025.
A demo of the Digital IDs was showcased at the recent Global Fashion Summit in Copenhagen.
Last month, Mulberry launched its first carbon-neutral collection, Lily Zero. The 12 styles have been created in Mulberry’s carbon-neutral Somerset factories with leather from a tannery in Germany that measures, reduces and offsets its carbon emissions.
During the year just ended, it also launched a resale program across all channels. The company said 88 percent of the collection is now using leather sourced from environmentally accredited tanneries, and that figure will increase to 100 percent by end of the 2022 calendar year.
The company is making further investments in the Mulberry Lifetime Service Centre at The Rookery in Somerset, England, which is now restoring more than 10,000 bags a year.
Shore Capital noted in its report on Mulberry that the brand’s Somerset-based manufacturing helped to insulate it from all the supply chain disruptions that have been plaguing the industry. The local production in the U.K. meant that new Softie bag and the latest Alexa style launched without any delays.
Asked about how customers were responding to the universal pricing, Andretta said they have embraced it. “This is a generation of shoppers that double and triple check prices, and they fully accept that prices are the same everywhere.”
He added that customers now perceive Mulberry as a luxury brand and there hasn’t been any price resistance.
“Sales of The Softie, one of our new styles which is made with sustainable down and is aimed at a younger generation, are keeping pace with the other bags in the U.K. and internationally,” he said noting that the price ranged from 1,250 pounds to 1,650 pounds, and was well above the 995 entry price point of many styles.
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