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Mulberry Group’s Luxury Handbag Designer Is Seeing Lower Online Sales In The UK

The premium handbag manufacturer reported a £4 million deficit for the half-year period ended October 1. Earnings were also influenced by the purchase of two prior clubs. In early trade on Wednesday, Mulberry Group shares fell 20% to 228p.
Yellow leather mulberry group handbag.

Mulberry Group had suffered a half-year loss due to a decline in digital purchases in the United Kingdom amid a deteriorating retail environment. The luxury handbag manufacturer lost £4 million in the six months ending 1 October, compared to a profit of £7.3 million in the same period last year, when it benefited from the sale of a store lease in Paris. Higher investment in technology and marketing, the absence of business rate relief, and the acquisition of its former franchises in Sweden and Australia all weighed on earnings.

Following this statement, Mulberry Group shares plummeted in morning trade before rebounding somewhat to close the day 8.1% down at 262p. Total revenue fell marginally to £64.9 million, owing to a quarter-quarter drop in online retail sales in the UK to £10.8 million as customers returned to shops and the heightened cost-of-living problem pinched consumer wallets. This was despite higher full-price and wholesale sales, as well as price increases in March and September, which helped raise the company's gross margins.

Furthermore, despite harsh lockdown regulations causing substantial economic damage in China, new shop openings increased sales. Mulberry reported that retail revenues had increased in the eight weeks after the end of the quarter, but warned that the overall economic situation remained hard, particularly in terms of cost pressures. The UK's inflation rate climbed to 11.1 percent last month, the highest level in more than four decades, owing mostly to massive increases in oil and gas prices, as well as rising food prices.

"We're living in a really specific period in fashion right now, when everything is lot faster," he remarked. "It's about remaining alert to what's going on for the brand." When we exited COVID-19, everyone wanted the highest heels. And we were able to quickly respond to that, working on a collection that would be appropriate for the times," he said of the brand's footwear. And, just in time for the holidays, "a handbag makes a good gift."

'The wider macroeconomic environment continues to present some uncertainty, particularly with regard to inflationary pressures,' the company told investors. As a company, we are dealing with inflationary pressures in a variety of ways.' Along with raising customer prices, the Somerset-based company has offset some of the additional costs by freezing its energy bills for the next three years.

It is also pursuing a worldwide sales expansion plan, with a particular emphasis on the Asia-Pacific area, where demand for its so-called "tiny bags" has been strong. Furthermore, the premium brand is shifting to a full ownership model, which has included the development of additional locations in Sweden and Australia, as well as the diversification of its product range. According to Russ Mould, investment director at AJ Bell, there are "big risks to this approach" that will put CEO Thierry Andretta "under a lot of pressure" to perform well.

'Not all luxury brands are created equal,' he said of the company's interim results. While you'd think Mulberry's wealthy clientele would be immune to cost-of-living pressures, the company's first-half results are more akin to a high-street retailer than a high-end brand.'

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