Mulberry outlines growth after bagging profit surge

Thu Dec 8, 2011 7:16am EST

A model presents a creation from the Mulberry 2012 Spring/Summer collection during London Fashion Week September 18, 2011. REUTERS/Suzanne Plunkett

A model presents a creation from the Mulberry 2012 Spring/Summer collection during London Fashion Week September 18, 2011.

Credit: Reuters/Suzanne Plunkett

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LONDON, Dec 8 - British luxury fashion brand Mulberry (MUL.L) said it had substantial room for growth in Europe, the United States and Asia, as it reported first-half profit more than treble last year's due to robust international demand.

The company, which designs, makes and sells leather goods and accessories, posted pretax profit of 15.6 million pounds ($24.5 million) in the six months to September 30, up 231 percent.

That compares with 12 million pounds forecast by Altium Securities. Market expectations range between 28 million and 30 million pounds for the full year, with the average forecast at 29.5 million, according to Thomson Reuters I/B/E/S data.

"Asia is the fastest-growing market, but actually we still have plenty of areas to penetrate in Europe and the States, so those are growing very strongly as well. We like to spread the risk," Chief Executive Godfrey Davis told Reuters on Thursday.

The company, best known for its leather handbags priced at between 500 pounds and 900 pounds ($774-$1,393), said international revenue more than doubled to 29.4 million pounds and that wholesale shipments grew 93 percent.

The luxury goods market has proved resilient to the global economic downturn, with high-end firms such as Burberry (BRBY.L), Hermes (HRMS.PA) and LVMH (LVMH.PA) reporting robust sales, but the grim macroeconomic outlook is a concern.

"It's incredibly reasonable to expect growth from Mulberry unless economic conditions become absolutely dire ... that's why we have reasonable confidence, but we're not foolhardy," Davis said.

Mulberry said it planned to open nine stores in the second half. It has agreed a 10-year distribution deal in October to sell its products in Japanese department stores and will open flagship shops in Tokyo and Osaka.

It will also open stores in South Korea and Singapore.

The company said in June it expected overseas sales to overtake those in its home market in two years, predicting particularly strong demand from the U.S. and China.

CLSA Asia Pacific Markets estimates demand in Greater China is expected to account for 44 percent of the global luxury goods market by 2020.

Davis said that with only one store in mainland China, Mulberry's stake in the Chinese luxury market was small relative to the growth opportunities.

"The group remains under-represented in most of the largest luxury goods markets globally, with a focused strategy in place to grow its footprint," Altium Securities analyst John Cummins said.

The company, which also sells womenswear, has a greater market capitalization than the combined total of struggling British high street retailers Dixons (DXNS.L), HMV HMV.L, Mothercare (MTC.L) and Game GMG.L.

Shares in Mulberry, which have risen more than 60 percent this year, rose 2.3 percent to 1,525 pence -- compared with a 0.3 percent rise in the FTSE All Shares Index .FTAS -- valuing the business at almost 900 million pounds.

($1 = 0.6380 British pounds)

(Editng by David Hulmes)

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