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Luxury handbag maker Mulberry has more than quadrupled its annual income, driven by a booming online business in China, and promised more to come, saying on Thursday that demand for its products had remained strong this spring and early summer.
Pre-tax profit for the year ended March rose by 358 per cent to £23.3m, on revenues that were 69 per cent higher at £121.6m. Shipments of "luxury British" leather handbags – to retailers trained by the company and through wholesale channels – tripled, leading robust growth across the group's divisions.
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The results beat market expectations by about 8 per cent. Mulberry shares rose by almost 9 per cent to 115p in early trading on Thursday.
The 50-year-old company, based in Somerset, is one of the "affordable luxury" brands to have thrived most, alongside Ted Baker, Chloé and J Brand jeans.
Overseas growth of these UK brands has far outpaced even healthy domestic trends; Godfrey Davis, chairman of Mulberry, said on Thursday: "While we remain cautious about the global economic environment, we are focused on increasing our overseas expansion."
Matthew McEachran, an analyst with Singer, said the company was handling the overseas expansion well, following Burberry's model through control of distribution routes where it could. Mulberry took over distribution in Hong Kong, the Netherlands and Belgium last year, and retail rights in Germany.
"It's a brand which is really starting to understand its potential," he said.
Seven new overseas stores opened last year, in cities including Beijing, Doha, Dubai and Sydney, and new stores are planned in, among other locations, South Korea, Bangkok and San Francisco, where a flagship store will open in Soho this autumn.
Fashionistas' preference for Mulberry helped drive up gross margins, from 59 per cent in 2009/10 to 65 per cent last year – a significant difference the company attributes largely to more sales being made at full price, since a lack of leftover stock at the end of fashion seasons meant lower clearance sales. Gross margins were also stronger.
Analysts with Altium, Mulberry's corporate broker, noted that the company's focus on handbags makes overseas expansion a simpler challenge. Mr McEachran, however, sees an expanding product range as another avenue for growth.
A lower tax rate aided in boosting earnings per share, which rose from 5.2p last year to 29.8p. Mulberry stated it may increase their full-year dividend from 3.2p to 4p.
A new flagship store at New Bond Street – blocks away from the previous physical location – and new headquarters incurred £2.3m in one-off property costs.
Although the company stated trading at the new flagship store was generating revenue 42 per cent higher than those in the same period all seasons before at the previous store.