House of Fraser, difficult UK market impact Mulberry's profits

For the six months to September 30, 2018, Mulberry Group reported underlying loss of 3.6 million pounds (4.7 million dollars) compared to 0.6 million pounds last year. The company said, after accounting for one off costs for House of Fraser provisions and the Korea launch, the loss before tax was 8.2 million pounds (10.7 million dollars). Group revenue in the period decreased by 8 percent to 68.3 million pounds (89.7 million dollars). On a like-for-like basis, UK retail sales were 7 percent lower, however total UK retail sales, including House of Fraser, were down 11 percent.

International retail sales increased 13 percent to 12.4 million pounds (16.2 million dollars) as the group benefitted from revenue generated in China, Taiwan, Hong Kong and Japan following the acquisition of these key Asian territories and expansion of the store network. Retail sales from Asian markets, Mulberry added, increased by 2.4 million pounds relative to last year but were offset by a reduction in retail sales of 1.3 million pounds in Europe and North America as the group closed four stores during the last twelve months to fine tune the store estate. Korea transitioned from wholesale to retail at the end of the period. The company’s global own retail network consisted of 88 directly operated stores and concessions at the end of the period.

Mulberry expands international retail presence

The international retail store network was enhanced through the new entities established in Asia, where the Group has increased the retail store base to 29 stores, from one store at the end of the prior year period.

Since March 2018, in the UK, the new flagship store on Regent Street was opened during September featuring the new Mulberry store concept. During the period, three House of Fraser concessions closed and one standalone store closed. In China, following the acquisition of three stores during March 2018 as part of the Mulberry Asia acquisition, a further store has been opened in Xian Shin Kong Place during April 2018. In Japan, the Group acquired five stores during May 2018 as part of the establishment of Mulberry Japan. The Group acquired 18 stores in Korea during August 2018 as part of the establishment of Mulberry Korea.

Wholesale revenue, comprising sales to partner stores and selective multi-brand wholesale accounts, reduced by 14 percent to 15.5 million pounds (20.3 million dollars) primarily due to the transition of the China business to company-owned retail during March 2018 and preparation for the Mulberry Korea transaction, which completed during August 2018. The partner store network at the period end totalled 19 stores in Asia Pacific, Europe and the Middle East. This reduction reflects the transfer of 28 stores from previous distributors to the Group's retail network, the closure of the Sydney store in anticipation of the transfer of the Australia business to the new distributor, Luxury Retail Group, the closure of one store in South Korea in preparation for Mulberry Korea and the closure of six non-strategic stores in the Middle East and Southeast Asia.

Mulberry says retail condition in the UK remains challenging

Mulberry added that retail sales continue to reflect a challenging UK environment with an encouraging trend in international. Group Retail LFL sales were down 8 percent for the six weeks to November 3, 2018, due to a high representation of UK within the mix. Global digital retail sales, excluding House of Fraser Digital sales this year and last year, were up 8 percent. UK retail LFL sales, excluding House of Fraser, were down 7 percent on last year.

International retail sales have grown in line with management's expectations and have increased by 25 percent due to the acquisition of stores and the selective expansion of the network during the period.

The Group anticipates an underlying profit before tax for the year ending March 31, 2019, excluding one-off costs, despite a challenging first half period.

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