Profits plunge as Mulberry faces a challenging year

The slump of more than a quarter in the pre-tax figure, from £36m to £26m, was widely forecast and blamed by the company on its investments in international markets which it hopes will help it ride out the economic gloom in UK and Europe.

But yesterday’s annual results also showed total revenues down two per cent. Sales in Mulberry’s own stores were up by six per cent on a like-for-like basis but dragged down by a 16 per cent dip in wholesale.

Shoppers continued to flock to its UK outlets, spending £91.8m on the likes of the Alexa and Del Rey designer bags which have in recent years turned the Somerset-based firm from a trusted briefcase and wallet maker into an international fashion powerhouse.

But there is anxiety over whether the momentum can continue after it emerged that Ms Hill, credited with the transformation that has seen Mulberry become a celebrity must-have brand, was to depart, reportedly over creative disagreements with management – in a move which saw shares plunge.

Ms Hill – who was made a CBE last year – has completed her work on next year’s spring/summer collection and is expected to stay on to finalise its London Fashion Week collection this September. But after that the future looks uncertain with the company pinning its hopes on Asian markets amid eurozone gloom.

Mulberry chief executive Bruno Guillon said: “After three years of rapid growth, we have had a year of consolidation during which we have laid the foundations for the transition of Mulberry from a UK success story into a global luxury brand. In particular, we are increasing UK production and enhancing both our retail experience and product range.

“Mulberry has a well-established business in the UK and a growing presence in Europe. With over 80 per cent of our sales derived from these markets where the economic climate remains difficult, Mulberry’s challenge for the future is to accelerate our brand awareness in the USA and Asia.”

He said boosting the brand’s profile in Asia would also help sales to tourists visiting Europe and the USA as well as growing its local business.

Mulberry revealed that in the year to the end of March it had opened 17 new international stores and recently completed the construction of a second Somerset factory, doubling UK production capacity.

Five partner stores were opened in Korea with others in Singapore, Shanghai, Beijing, Nagoya and Bahrain.

Figures for the ten weeks to June 8 showed like-for-like retail revenues continuing their upward trend, climbing six per cent.