UK: Expansion costs hit Mulberry H1 profit
- H1 profit of GBP5.1m, down from GBP7.3m
- Sales revenue up 2% to GBP78.1m
- Like-for-like sales rise 4%
Higher costs weighed on Mulberry's first-half profit
UK luxury business Mulberry Group has seen its first-half profits slump 30%, after higher costs related to its ongoing expansion efforts offset a slight rise in sales.
Net profit reached GBP5.1m (US$8.3m) for the the six months to 30 September, down from GBP7.3m in the same period of last year.
Operating expenses increased 13.7% to GBP42.2m from GBP37.1m in the previous year, related to new directly operated stores and additional employee costs.
The company today (5 December) said sales grew 2% to GBP78.1m from GBP76.5m last year, despite what it described as a "tough economic climate". Retail revenue grew 6% to GBP49.5m, while like-for-like sales were up 4%.
International revenue jumped 29% to GBP6.3m to GBP4.9m, reflecting an improvement in North America and continued growth in Europe.
Wholesale revenue was down 5% to GBP28.6m, due to cautious ordering by European and Asian distributors, which Conlumino analyst Anusha Couttigane warned is "something Mulberry will need to rectify as it pursues plans for international expansion".
The company completed the construction of its new Somerset factory, which is already in production and is expected to be at full capacity by mid-2014.
Mulberry said it continues with international expansion efforts and is on track to open 15 new stores by the end of the full year. The brand has also secured a location for a flagship store in Paris, which is expected to open in 2014/2015.
Couttigane added: "Whilst this continues to be a challenging year for Mulberry, its latest results are promising, indicating that the designer handbag label still represents a hugely lucrative business."
During the nine weeks to 30 November, the luxury brand saw retail revenue climb 3%, while international retail revenue surged 49%.
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