Mulberry's mixed bag as profits fall

Pre-tax profits at the high-end handbag maker dropped to £7.2m in its first half. Is this the end of the luxury boom?

by Emma Haslett

They say during a recession it’s the Primarks and the Pradas that survive (or, indeed, the Mulberrys and the Matalans). Now we’re beginning to come out of the other side, there are signs things aren’t going quite as well at the top end of the market: luxury handbag maker Mulberry has posted results showing profits before tax during the six months to the end of September dropped, from £10m in 2012 to £7.2m this year.

It wasn’t all bad: first half revenue rose by 2% to £78.1m, while retail revenue rose 6% to £49.5m. Wholesale prices, on the other hand, fell 5% to £28.6m.  

Those who don’t know their Bayswater from their Alexa might not see it as a tragedy, but Mulberry is one of the British businesses beating a path to the Asian market, so how they fare out there has a bearing on other firms.

What’s encouraging is that international retail sales excluding online rose to £6.3m, up 29% from £4.9m during the same period last year – which reflected an ‘improvement’ in North America and Europe, the company said.  

Online sales, on the other hand, dropped 4% to £6.6m. Online now represents 8% of group sales, down slightly from 9% last year, although the company did caveat that this was after ‘very strong growth during the previous year’.

What’s going on? The company suggested it’s facing stiff competition from mid-market brands like Topshop and Zara, both of whom have a nice line in copying catwalk trends and getting them into the shops in double time. And these days, the gap between the cost of bags on the high street (Whistles’ £395 Calf Hair Swing Satchel, for instance) and their designer counterparts (Mulberry’s comparably-sized Effie Satchel, £550) has narrowed.

Although the top end of Mulberry’s offering goes much higher: many of its bags are priced at over £1,000, which pretty much excludes anyone who understands the phrase ‘cost of living crisis’.

Mulberry is now on the hunt for a new creative director following the departure of ‘Alexa’ mastermind Emma Hill. With its rapid growth in Asia, we’d suggest conversational Mandarin might have an advantage…

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