Mulberry profits fall as UK sales struggle amid tourist tax hit
The luxury handbag maker saw UK retail sales edge lower to £87.7 million from £88.5 million the previous year.
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Your support makes all the difference.Luxury handbag maker Mulberry has seen its profits slump after higher costs and as UK sales stall amid economic uncertainty and a hit from the loss of VAT-free shopping for tourists.
The firm posted pre-tax profits tumbling to £13.2 million in the year to April 1, down from £21.3 million the previous year, in spite of a 4% rise in group wide revenues.
The group said retail trading improved over the final six months of its financial year, with group sales up 9% in the second half, helped by the reopening of China after repeated Covid-19 lockdowns impacted upon the start of its year.
UK retail sales edged down to £87.7 million from £88.5 million the previous year.
This marked an improvement after UK sales dropped 10% in the first six months, with trading in thesecond quarter particularly impacted as the economic uncertainty and cost crisis knocked shopper confidence, with the lack of VAT-free shopping also taking its toll.
Thierry Andretta, chief executive of Mulberry, has warned that UK sales are being impacted as wealthy shoppers shun London for Paris and Milan due to the tax hit.
The group announced in February that it was closing its Bond Street store due to a “dramatic” drop in customers and sales after the removal of VAT-free shopping.
It redeployed all staff from the Bond Street store across its remaining London shops.
Costs associated with the closure of the Bond Street store contributed to the profits fall, as well as a 26% jump in operating expenses.
This included a 9% hike in staff costs and investment in new stores in Sweden and Australia.
Mulberry said retail sales for the first 12 weeks of the new financial year were up 15%, but UK revenues remained flat “due to the impact of the broader economic environment”.
Mr Andretta said: “We have made significant investments in the company this year, as well as expanding our direct-to-customer model with the recent acquisitions of businesses in Sweden and Australia.”
But chairman Christopher Roberts cautioned: “Whilst we see every opportunity for Mulberry to continue to succeed, we must remain mindful of the external climate and ongoing sector headwinds including high inflation.”
Retail tycoon Mike Ashley, who owns a 37% stake in Mulberry, was earlier this year reported to be attempting to force his way on to the board of the handbag group.