Mulberry goes hell for leather with big profit jump

The leather goods manufacturer has seen a four-fold rise in profits. Not a bad way to celebrate your 40th birthday...

by Emma Haslett
Last Updated: 06 Nov 2012
If you don’t have one of Mulberry’s devastatingly on-trend animal print Alexas swinging from your arm at the moment, you’re missing out. Shares in the luxury leather goods manufacturer opened nearly 9% up this morning, after it published end-of-year results showing profits had almost quadrupled to £23m from £5m last year. That’s an impressive performance, particularly considering the state of the high street at the moment – another sign that luxury goods is the place to be in retail at the moment…

Mulberry’s figures showed total revenue in the year to March jumped a whopping 69%, to £122m, while retail sales rose by a not-too-shabby 44%. And it doesn’t seem to have slowed down since the end of that reporting period: in the 10 weeks to June, like-for-like sales grew by 42%.

Over the same period, sales in the UK rose by a third – hardly surprising, considering that Mulberry is now regarded as one of the UK’s most robust ‘heritage’ brands (in fact, this year marks its 40th anniversary). But last year, its performance was largely driven by its international performance, where revenue grew by 145%, thanks to a boost in sales in Asia and the US. Either way, investors will be able to treat themselves to one of next season’s Polly bags: the company has increased its divi by 82% to 4p.

It might seem odd that as the high street struggles to make ends meet, companies like Mulberry are thriving. Analysts have said that’s partly down to the well-off being unaffected by the downturn, while the middle classes have rediscovered a penchant for deferred gratification – so they’re saving up for high-quality pieces, rather than buying ‘throwaway’ fashion from the likes of Primark.

Naturally, then, CEO and chairman Godfrey Davis says he’s optimistic about Mulberry’s potential for next year: the company is planning to open new stores in New York, Amsterdam, Germany, Korea, China and Bangkok. It also says it’s planning to expand its factory in Somerset to add 30% capacity to production in order to keep up with demand. (No word on its Chinese manufacturing – but then again, that might not be quite as in-keeping with that heritage image…).

But although the luxury market seems to go from strength to strength, Prada’s latest travails serve as a reminder that no company is entirely infallible. The Italian fashion house, which is just days from listing on the Hong Kong stock exchange, has lowered its expected return from $2.6bn to $2.3bn, after a lukewarm reception from investors (although $2.3bn is hardly loose change). And it’s not the only one encountering a set-back: high-end luggage maker Samsonite’s debut in Hong Kong today seems to have gone down rather badly, with shares dropping by 11% on its first day. So the picture isn’t uniformly positive…

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