Mulberry hurt by rising costs as margins fall

 
Kasmira Jefford
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MULBERRY’S profits tumbled by more than a third in the first half of the year due to rising costs as the British fashion house presses ahead with its expansion plans and moving the brand upmarket.

The group yesterday posted a 36 per cent drop in pre-tax profits to £10m for the six months to 30 September, after the rising cost of raw materials, such as leather, caused its gross margins to decline to 61.3 per cent.

This offset a six per cent rise in overall revenue to £76.5m.

Bruno Guillon, chief executive, said sales at stores open over a year had increased 11 per cent in the nine weeks to 1 December and insisted the group would meet full-year expectations of around £30m.

Guillon, who joined the company from luxury brand Hermes in March, also reiterated plans to open 15 to 20 stores per year and raise the company’s image as a luxury brand.

In England, where it aims to have 50 per cent or more of its leather accessories made, the group has started work on a second factory in Somerset and plans to push its Made in England label.

“We are investing in getting Mulberry to the standard that will be appropriate for international expansion,” said Guillon.

“The challenge today for Mulberry is to convert British success into global success stories...this strategy is an evolution not a revolution,” he said.

Mulberry’s shares have fallen by 25 per cent after the group issued a profit warning last month, which it blamed on a slowdown in Asia and its decision to cut back on the number of wholesalers it sells to.