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Mulberry has suspended its dividend as the British luxury handbag maker warned that “alarmingly low levels of footfall” in city centres and the absence of wealthy tourists would continue to hit sales.
The group said revenues fell 10 per cent to £149m in the year ending in March as the pandemic impact first started to be felt. Losses before tax, adjusted for coronavirus-related impairments, swung to £14m compared with a £1m profit last year.
Thierry Andretta, the company’s chief executive, told the Financial Times that Mulberry had been on track to record a pre-tax profit in the second half before the pandemic forced stores to shut.
Mulberry, he said, had been particularly hit by the pandemic-induced absence of deep-pocketed tourists from China, the Middle East and the US, which make up about a tenth of the company’s sales.
“When you add that there is a project in the UK to move out of tax-free it is even more scary,” the chief executive said, referring to the UK’s decision to withdraw from the EU’s value added tax relief for overseas visitors when the Brexit transition period ends in December.
The group in June announced that it would cut a quarter of its workforce as it expected lower demand, and about 350 jobs have since been axed in its offices, factories and retail network.
Fashion retailers, from high street chains to upmarket brands, continue to suffer in the pandemic as people have remained reluctant to visit shops even after lockdown restrictions have been lifted.
The Aim-listed company said, however, that it had been “able [to] withstand some of the pressures” facing the sector and expected losses to narrow this financial year. But it warned that revenues were down 29 per cent in the six months to September, which it blamed on persistently low footfall in its 120 stores and concessions across Europe, North America and Asia.
Mulberry’s share price, which has almost halved since February, was down 9 per cent on Monday morning.
Mr Andretta said the company had stuck to its plan to manufacture more bags, such as its popular Bayswater, in the UK but warned that Brexit and the depreciation of the pound meant leather and other materials were now more expensive.
The chief executive was, however, upbeat about the company’s digital sales, which rose 69 per cent in the six months ending in September to £23.5m. He said Mulberry’s online strategy was ahead of rivals in the luxury market, which has struggled to convince consumers to buy expensive products through the internet.
Frasers, the retail company controlled by magnate Mike Ashley, in February bought a 12.5 per cent stake in Mulberry, which was worth about £20m at the time. Mr Ashley, whose group owns Sports Direct and House of Fraser department stores, has warned of more shop closures and job losses as retailers seek to weather the pandemic crisis.
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