BUSINESS LIVE: Metro Bank to slash workforce; Dr Martens sales slump; Mulberry suffers luxury slowdown

Mark Crouch, analyst at eToro:

‘Mulberry has reported a troubling set of numbers this morning as its losses have widened despite sales increasing. While some of this comes down to investment costs, it has admitted that the economic environment is finally beginning to catch up with it.

‘Notable in its half years this morning too was a significant swipe at the UK Government’s VAT refund policy. Mulberry’s chief executive says the lack of VAT-free shopping for tourists is creating ‘challenges’ for the sector, and others including hospitality and tourism.

‘The Government should be concerned about such a vocal voice of criticism from the sector. London is a major global capital – if VAT is undercutting the ability for luxury goods firms – of which there are many in London – to struggle, then the capital could soon lose some of its sheen compared to competitors.’

Brokers have cut share price expectations for Dr Martens after the boot maker revealed poorer performance than expected on the back of weaker US trade.

Peel Hunt analysts said weak US trading will takea long time to recover and its pre-tax forecast from £128.8million to £10.8million.

It said: ‘DOCS has been hit by a mix of macro factors and the continued hangover of excess stock from prior seasons.

‘There is a high-margin, heritage brand at the core, but we see faster recovery stories across the sector, leaving DOCS on the shelf for longer, one to revisit in 6-12 months.’

‘We cut our [target share price] from 150p to 110p and reiterate Hold.’

Lloyds Banking Group is shutting another 45 bank branches across its network amid the ongoing shift away from high street banking.

The group is shutting 22 Halifax branches, 19 Lloyds branches and four in the Bank of Scotland business.

DIY investors will now be able to invest in company IPOs via Lloyds Bank.

Saudi Arabia is taking a 10 per cent stake in Heathrow as it steps up its investment in the UK.

Its sovereign wealth fund, whose vast array of assets includes Newcastle United FC, has agreed to pay Spanish infrastructure giant Ferrovial £1billion for the shares.

Russell Pointon, director of consumer at Edison Group:

‘Having strengthened their Americas leadership team and appointing a new Chief Brand Officer, Dr Martens looks to refocus marketing as they remain confident in their business and its growth opportunity.

‘However, current trading into the third quarter has been weaker than expected across the board, albeit with some signs of improvement in some regions in more recent weeks.

‘The trading is weak enough to force management to reduce guidance again for FY24 and given macroeconomic uncertainty has withdrawn its prior guidance for high-single-digit revenue growth in FY25.’

Metro Bank is axing 20 per cent of its workforce in a bid to cut costs, days after its investors backed a £925million rescue package.

The embattled lender is also ‘reviewing’ seven day opening and extended hours across its branch network, it told investors on Thursday.

Derren Nathan, head of equity research at Hargreaves Lansdown:

‘The pub chain behind Harvester and Miller & Carter had no problem filling seats at its tables last year. The focus on meeting punters’ preferences translated to LfL sales and volume growth across all brands. Mitchells & Butlers has something to offer most budgets.

‘The continuing investment in the estate and customer service is translating into impressive outperformance in takings compared to the wider market. That’s likely to continue. And despite a 13.2% decline in pubs and restaurants in business since the outbreak of COVID-19, there could yet be more supply to come out of the market.

‘But it’s been more challenging to get the bottom line moving in the right direction. Sales growth wasn’t quite strong enough to offset cost headwinds of £175m faced in the period.

‘Mitchells & Butlers expects these pressures to abate somewhat in the current period, helped in part by the direction of energy prices, but offset by increases in the National Living Wage, set to arrive in April. Guidance on the same headwinds this year implies they’ll more than half to £65m. But getting back to profit growth isn’t assured.

‘Sales growth so far this year has slowed a couple of percentage points as landlords head into the crucial festive season. And there are signs that consumers are cutting back on eating out in order to save for Christmas. With a debt pile of over £1bn it’s no surprise the purse strings haven’t been loosened to allow a dividend.

‘With continuing uncertainty for the immediate outlook, it makes sense to prioritise investment in the business, and to leave some room for promotional activity.’

Mitchells & Butlers is hoping to rebuild its margins to pre-pandemic levels on the back of easing input costs after the British pub group posted a fall in annual profit of around 8 per cent in a year blighted by cost pressures.

British pub groups and retailers are lining up offers to attract customers as Britons gear up for a merry holiday season.

The company, which had tweaked its menus last year to tackle high costs, said it expects overall cost headwinds for the year to reduce to about £65million, underpinned by a reduction in energy prices and slowing food inflation.

The owner of the Toby Carvery, Harvester, and All Bar One brands said its adjusted operating profit for the year ended 30 September came in at £221million, down from £240milliion a year earlier.

‘Whilst we remain mindful of the pressures that the UK consumer is facing, the strength of our sales growth alongside an abating cost environment gives us confidence for the financial year ahead,’ CEO Phil Urban said in a statement.

The chairman of UBS has warned of ‘hard cuts’ facing investment bankers from Credit Suisse – setting the scene for thousands of job losses in the UK.

Colm Kelleher acknowledged it was inevitable the London workforce would shrink as the two banks, which together employed around 11,000 in the capital before they merged, prepare to move into a single HQ.

He was unable to say, when asked on the sidelines of the FT’s global banking summit, how many jobs would go in London amid speculation 35,000 could go worldwide.

The chief executive of Deutsche Bank has called on the European Union to follow Britain and scrap the cap on banker bonuses in order to help it compete with other financial centres.

‘In the fight for the best talent, we need a level playing field,’ Christian Sewing told the FT’s global banking summit.

Mulberry has flagged ‘uncertainty’ in the global luxury market, but the handbag maker told investors it is well positioned to weather the storm as the group posted solid sales growth.

Group revenue jumped up 7 per cent to £69.7million in the six months to 30 September, as international retail sales soared 34 per cent to £23.5million.

However, Mulberry’s reported loss before tax expanded from £3.8million to £12.8million, largely as a resul of ‘Software as a Service’ costs, the additional operational costs of opening new stores in Sweden and Australia, and ‘additional important investments for future growth in the Group’.

CEO Thierry Andretta said:

‘Against a challenging macro-economic backdrop, which is impacting the entire luxury landscape, we have continued to invest in our long-term future.

‘Our strategy to transform our international businesses to a direct-to-consumer model has enabled us to control the entire customer experience in Sweden, Australia, New Zealand and Japan. Our investments in the period in our digital systems, stores and product will power future growth.

‘As one of the most iconic British luxury brands, product innovation remains at the heart of Mulberry. Our recent product launches, the Islington, Pimlico and Lana have been well received by customers, which is testament to our heritage, fresh designs and modern craftsmanship.

‘Looking ahead, we are well placed to capitalise on the important festive trading period and expect the usual second half weighting to trading.

‘There is no doubt, however, that the macro-economic environment has deteriorated, and this has had a knock-on effect on consumer sentiment.

‘At Mulberry we have ensured that we are prepared to navigate this tricky environment, and we are confident in our ability to continue to execute our strategy.’

Dr Martens expects to post a sharp profit slump for the year after a slow start to the autumn-winter season impacted by warm weather across its three key regions and staggered demand overall.

The boot maker expects revenue to decline by high single-digit percentage year on year, on a constant currency basis.

Full-year core profit is also expected to be ‘moderately below the bottom end of the range’ of market expectations of £223.7million to £240million.

The British company has been struggling with waning demand, especially in the US – its second-largest market by revenue – as wholesalers turn cautious amid a gloomy economic outlook.

‘We expect that it will take longer to see a material improvement in U.S. performance than initially anticipated,’ Dr Martens said in a statement.

‘Wholesale customers have low in-market inventory levels of our products, and therefore, we can expect them to re-order, however the timing and level of these re-orders are unpredictable, reducing visibility in our wholesale business.’

Charlie Munger was Warren Buffett’s sidekick for more than four decades as they went about transforming Berkshire Hathaway from a failed textile maker into a spectacularly successful investment empire.

Munger died, aged 99, on Tuesday, leading to an outpouring of tributes from businessmen, financiers and politicians.

While Buffett was the star of the show, Munger had far more influence on Berkshire than his vice-chairman title suggested.

Metro Bank will slash 20 per cent of its workforce as part of a £50million cost-cutting drive, which the embattled lender expects to complete early next year.

The bank, which earlier this week received shareholder approval for a refinancing and recapitalisation plan, expects to take a one-off restructuring charge of between £10million and £15million in 2023.

Three Metro board members will also step down at the end of the year, leaving the board with five non-executive and two executive directors.

‘The support shown from our investors through this transaction will allow Metro Bank to accelerate its growth plans, with the new capital allowing us to unlock the potential in the business and deliver sustainable profitable returns as we strive to be the number one community bank.

‘We remain committed to stores and the high street but will transition to a more cost-efficient business model while remaining focussed on customer service. These actions alongside other initiatives to reduce costs are expected to deliver savings of up to £50 million per year on an annualised basis.’