Mulberry Swings to Loss in 2020, as Sales Shrink Due to COVID-19

LONDON — Sales trends at Mulberry are on the up, but the company — and its luxury goods peers here in Britain — still have a few more battles to fight.

Mulberry, which saw sales and profits tumble in fiscal 2020 due to already shaky U.K. sales and the onset of COVID-19, said it has begun to see a small ray of light at the end of the tunnel.

Trading since the start of the current financial period is ahead of expectations, with group revenue down 29 percent year-on-year for the period spanning March 29 to Sept. 26.

Mulberry said it has seen an “improving trend” since stores reopened over the summer, and that local U.K. customers are buying once again.

Digital revenue is up 69 percent, while Asia-Pacific retail revenue is up 27 percent. The company has also added to its net cash pile, which amounted to 8 million pounds on Sept. 25.

Bank facilities have been extended to March 2022 with renegotiated banking covenants reflecting the current COVID-19 world, the company said.

Mulberry is also expecting losses to be reduced in the current financial period.

The company has come through a period of major restructuring, having laid off about 25 percent of its staff and making the decision not to renew its ready-to-wear and footwear licenses with Onward Luxury Group.

Mulberry also waved goodbye to its creative director Johnny Coca, who left the company, as planned, in March. Coca has since joined Louis Vuitton.

“We’ve had a full reorganization of the business, and we’re on a good track. We’re confident about the future,” said chief executive officer Thierry Andretta in a telephone interview Monday.

The company is understood to be in no hurry to replace Coca.

“He left us with a great legacy, and beautiful products. We have an amazing in-house team, and I’m impressed with what they’ve done,” Andretta said.

The challenges that lay ahead are manifold, and Mulberry isn’t the only luxury goods brand that’s bracing for more pain later this year, and into next year.

“We cannot escape the reality that British luxury and U.K. cities face a very uncertain future, hampered by necessary, but dramatic, social-distancing measures and alarmingly low levels of footfall, as well as the pressures of high rents and business [taxes] and the upcoming changes to tax free shopping,” Andretta said.

During the interview, Andretta pointed out that London has some of the highest business taxes and property prices in the world.

If that were not enough of a burden, the British government has revealed plans to wipe out tax-free shopping as of January, a decision that has rocked high-end British retailers reliant on sales to international tourists.

“We are doing everything to fight this decision,” said Andretta, who pointed out that London is a shopping haven for Chinese and Middle Eastern tourists in particular. “The Chinese do not come to London to sight-see. They come to shop.”

He said between the taxes, the rents and the cancellation of tax free perks for tourists, Mulberry could be forced to shut some of its stores in the months ahead.

Earlier on Monday, Mulberry posted an underlying, pre-tax loss of 14.2 million pounds in fiscal 2020 due to the impact of COVID-19.

The underlying figure compares with a profit last year of 1 million pounds. Due to a series of new accounting measures, Mulberry reported an actual pre-tax loss of 47.9 million pounds in 2020, compared with 5 million pounds in the corresponding period last year.

The reported loss was due in large part to the expected impact of COVID-19 on future trading at its Bond Street store.

Revenue in the 52 weeks to March 28 fell 10.2 percent to 149.3 million pounds.

The company added that it was already wrestling with a “challenging U.K. market” even before COVID-19 hit, with local sales down 6 percent even before the pandemic struck.

During the 12-month period, international retail sales were up 4 percent, while in Asia-Pacific they rose 30 percent.

Andretta said the company had faced the most challenging market conditions in its history, but has still managed to make some strategic and operational progress.

“Prior to the impact of the coronavirus pandemic, we were performing well, and on-track to record a pre-tax profit in the second half of the year. This was due to progressing our four-pillar growth strategy: Our omnichannel distribution, international development in Asia, a drive for constant innovation and sustainability.”

He said the group had reacted swiftly to the impact of COVID-19, managing capital and reducing costs to ensure it was able to maintain a “robust” liquidity position. The company also made PPE for NHS hospitals.

At the end of fiscal 2020, the group had net cash of 7.2 million pounds, compared with the previous year’s 11.1 million pounds, reflecting the increased operating loss, offset by lower working capital and capital expenditure.

It has decided not to pay a full-year dividend in order to maintain its liquidity.

Mulberry’s share price on the London Stock Exchange closed down 11.5 percent to 1.47 pounds on Monday.

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