Shares in Mulberry (MUL:AIM) were marked up 15% to 292p on news the posh handbag maker now expects to beat market forecasts for its 2021 financial year by reporting a small underlying pre-tax profit.
At the first half results last November, the Mike Ashley-backed British luxury brand had guided towards reduced losses for the year ended 27 March 2021 on lower sales.
DIGITAL PROGRESS, FEWER DISCOUNTS
In today’s well-received update, Mulberry said it now expects to outperform expectations and swing back into the black for the year.
In common with larger luxury goods groups such as Burberry (BRBY) and LVMH, Mulberry has seen continued strong growth in Asian markets, but the company also cited strong sales on its digital platforms and improved margins due to lower mark-down sales for the forecast ‘beat’.
IMPROVING SALES TRAJECTORY
For the first half ended 26 September 2020, Mulberry’s sales fell almost 30% to £48.9 million due to the impact of Covid and retail store closures.
Yet at the time, management flagged an improving sales trajectory with the revenue decline moderating from 39% in the first quarter to 18% in the second.
With brick and mortar outlets temporarily shuttered due to the pandemic, Mulberry’s digital sales shot up 68% to £23.4 million in the half, with Asia Pacific retail sales rising 28% thanks to ongoing investment in the region, with Mulberry highlighting high growth in China and Korea.
Mike Ashley’s Frasers (FRAS), the retail empire behind Sports Direct and department store House of Fraser, has amassed a 36.8% strategic stake in Mulberry but has ruled out a bid (thus far) for the maker of the iconic Alexa bag.
Earlier this month, to mark its 50th anniversary as a British luxury brand, Mulberry launched ‘The Mulberry Made to Last Manifesto’. This is its bold sustainability strategy to transform the business to ‘a regenerative and circular model, encompassing the entire supply chain - from field to wardrobe - by 2030’.
