Mulberry boss vows to ‘reprioritise and rebuild’ as losses mount

Mulberry’s new boss has said the handbag maker must “reprioritise and rebuild” after the beleaguered fashion brand’s losses widened in the first half.

The group has struggled in recent years with moderate spending on luxury goods, especially in the United Kingdom and China, two of its largest markets.

Its domestic retail revenue fell 14 per cent to £31.2m in the six months to September, while Chinese sales more than halved.

Weaker orders from wholesale partners and franchisees also caused the London-listed company’s overall turnover to drop 19 per cent to £56.1m.

Gross margins fell around four percentage points to 66.5 percent following price cuts and significant promotional activity to reduce stock levels.

Mulberry slumped to an underlying pre-tax loss of £15.7m for the first half, an increase of £3m on the same period last year.

Mulberry Group Shares fell 6.8 per cent to 110 pence on Tuesday morning, taking its losses over the past year to around 27 per cent.

“The first half results illustrate the clear need to change priorities and rebuild the business,” said Andrea Baldo, CEO of Mulberry.

“In response to current market conditions, we have taken decisive actions to optimize operations, improve margins, reduce working capital and strengthen our cash position.”

Mulberry’s problems are familiar to luxury peers like Burberry, which has recently embarked on its own turnaround plan.

Mulberry recently raised £10.75 million in cash to bolster its balance sheet and give it enough financial flexibility to support a turnaround plan.

In addition to this, the company has expanded its debt facilities to £27.5 million and is carrying out a strategic review, which will conclude next month.

Baldo took up the role in September after running Danish fashion brand Ganni for six years and before that Italian group Coccinelle.

He replaced Thierry Andretta, who resigned in July after nine years at the helm of Mulberry, during which time the company’s share price had plunged nearly 90 percent.

Baldo has already rejected a takeover attempt by the Frasers Group, whose stake in Burberry amounts to more than 37 per cent.

Mike Ashley’s retail empire made two failed bids for the luxury group, the second totaling £111m, before backing down in the face of opposition from Challice Group, Mulberry’s largest shareholder.

After rejecting a takeover, Julie Palmer, partner at Begbies Traynor, said Mulberry “now needs to demonstrate that it can deliver on its plans to reshape the business and return to growth.”

He added: “It is embarking on its long road to financial recovery in a troubled UK environment characterized by volatile confidence and higher costs, so that won’t make life any easier.”