30th Nov 2022 17:48
(Alliance News) - Mulberry Group PLC on Wednesday offered a glimmer of hope amidst otherwise disappointing half-year earnings, arguing that it was well-placed for Christmas trading despite swinging to a loss.
Shares in the Somerset, England-based luxury fashion company closed 9.8% lower at 257.00 pence on Wednesday, reflecting the response of traders to the retailer's "disappointing UK sales".
For the six months ended October 1, the company swung to a pretax loss of GBP3.8 million from a profit of GBP10.2 million the previous year, as operating expenses climbed 42% to GBP48.6 million from GBP34.3 million.
Revenue also slipped marginally, falling 1.2% to GBP64.9 million from GBP65.7 million.
The company blamed UK retail sales, which slumped 10% to GBP34.1 million from GBP38.0 million a year before, on a "weak economic environment". This was despite increased retail sales in Covid-hit China, which contributed to the increase in Asia-Pacific retail sales to GBP11.9 million from GBP11.8 million a year earlier.
"Investors are shrugging off the robust performance in China with sales up 6% despite Beijing's strict Covid lockdown measures," said Interactive Investor's Head of Investment, Victoria Scholar.
"Also weighing on the shares are digital revenues which have been struggling with the post-pandemic economic reopening and the return to physical stores. In terms of Mulberry's bottom line, earnings took a hit from a one-off profit on a disposal of its Paris lease for GBP5.7 million, also sending shares sharply lower," Scholar added.
However, Mulberry remained optimistic of its prospects, despite seeing a decrease in earnings.
Gross margin increased to 71% from 69%, supported by the company's "focus on full-price sales and increased volume efficiencies".
Chief Executive Officer Thierry Andretta argued that Mulberry had delivered a "resilient performance" in the context of macroeconomic challenges, "supported by strong international demand and continued investment in the UK".
AJ Bell analyst Russ Mould supported this view, and said that while Mulberry was in the "unenviable position of chalking up a material loss", the situation could have been "even worse if the company hadn't hedged its energy costs for three years in October last year, so management deserve a pat on the back for that move".
Looking ahead, Mulberry said that it remains confident of returns from Christmas trading, despite macroeconomic challenges.
CEO Andretta added: "We are confident in our ability to execute our strategy and to continue to invest across the group for our future growth, in spite of the challenging economic and geopolitical backdrop."
By Holly Beveridge; [email protected]
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