Mulberry swings to loss, raises new funds, but new CEO is upbeat

Mulberry’s full-year results for the 52 weeks to the end of March have been released, along with news of a cash call. It’s issuing new Ordinary Shares to raise £10 million and launching a Retail Offer to raise up to £0.75 million.

The company, which replaced its CEO a month ago, issued audited results which show that (like fellow British luxury firm Burberry), it’s struggling to boost sales and generate profits.

Group revenue for the year was down 4% to £152.8 million with “positive revenue growth in the first six months of the period offset by a challenging second half, with ongoing macro-economic uncertainty impacting consumer spending in the luxury retail sector”.

UK retail sales fell to £84.7 million from £87.7 million and retail sales in Asia Pacific dropped to £27.7 million from £28.9 million.

That said, total sales international retail rose 8% to £50 million, “driven by developments in Sweden, the US, Australia and New Zealand”.

And the company’s digital sales rose 4% to reach £50.6 million which means they now make up 33% of total group revenue compared to 30% a year ago.

But more bad news came as the gross margin dropped to 70.1% from 71.2%, which reflected actions the company took during the year to manage its inventory levels.

The result of all this was an underlying loss before tax of £22.6 million, down sharply from the profit before tax of £2.5 million a year earlier. The company blamed the aforementioned lower revenues and margin, along with increased operational costs. The reported loss before tax was £34.1 million, again, down from a profit before tax of £13.2 million a year earlier.

So are things looking up? Not really. The company said that group revenue is down 18% for the 25 weeks since the period end and retail revenue is down 14% “with all regions continuing to be challenged by ongoing macro-economic uncertainty”.

The group’s debt facilities have been increased to £27.5 million with renegotiated covenants to reflect the current trading environment.

It means that new CEO Andrea Baldo has an undeniably tough task on his hands, again, just like the new CEO at Burberry does.

So what about that new plan to raise cash via a share issue? It announced millions of new shares underwritten by Challice, its existing majority shareholder, to raise £10 million. Both Challice and another big shareholder, Frasers Group, have preferential rights over those new shares. The other part of the share move, the Retail Offer, will allow other shareholders to take part in fundraising of £750,000.

The £10.75 million’s net proceeds will be used to strengthen the group’s balance sheet and “provide financial flexibility to support plans being developed by Andrea Baldo and the management team to return the business to profitability and drive future growth”.

Chairman Chris Roberts said: “Over the course of the year, the macro-economic environment presented significant challenges for the luxury sector, with markets across the globe facing a tightening of consumer spending. Whilst the financial performance for the year was disappointing, we believe that the combination of the appointment of a new CEO, our new debt facility and the capital raising will put the group on a firm footing to ensure we are well set up for future growth.

“I, along with the wider board have been highly impressed with Andrea’s drive and tenacity in his first few weeks in post. We are confident in our long-term prospects as we move forward into this next chapter.”

And Baldo added: “Mulberry is a beloved brand with a proud heritage, globally renowned for crafting beautiful, high-quality products from our Somerset factories. Since joining, I have been working closely with our teams in the UK and internationally to drive swift, decisive actions. In the short term, we are focused on enhancing operational efficiency and implementing targeted product, pricing and distribution strategies to regain market share in our core market of the UK. While these immediate measures are critical, I am now fully committed to conducting a comprehensive review to develop a refreshed strategy that will position the group for both short-term recovery and long-term, sustainable growth.”