Mulberry profits hit by international expansion costs

British luxury giant sees profit dive 28% to £7.2 million

Mulberry’s plan to turn itself into a global luxury brand has hit profits, the company admitted today.

The London and Somerset-based company, which is famous for its handbags named after stars including Aexa Chung and Lana Del Rey, reported a 28 per cent tumble in first-half profit as its turnaround plan and international expansion hit the bottom line.

Bruno Guillon, Mulberry’s chief executive who joined the British company from French luxury brand Hermès last year, said: “It is important to not forget our project to transform this UK success story into a worldwide success.

“We are facing challenges but we are still growing and we are encouraged by our international growth and our margin improvement.”

The group has revealed plans to open a larger store on Rue Saint-Honoré in Paris as part of its strategy to target world cities with high-spending tourists.

It intends to open stores across Asia and the US and wants to attract new customers from as far afield and China and  South America.

Mulberry is due to open another 15 stores during the coming year.

Guillon added: “Chinese shoppers, for instance, need to see us in Asia but also see us in the right locations when they travel abroad.”

Half-year profit was down by 28 per cent to  £7.2 million, but comparable retail sales growth jumped by 4% to £49.5 million.

Shares dipped 1p to 1016.5p.

The company has issued two profit warnings during  the past 14 months and its shares have fallen by 30% in two years.

The brand is still searching for a new creative director to replace Emma Hill who left in the autumn and its February catwalk show at London Fashion Week has been cancelled. Guillon said: “We need to be patient to find the right person — the right mix of vision and talent. The catwalk show is a point of view about the brand and we cannot do this until we have a creative director.”

He said that a replacement would be announced in the next few months.

Mulberry has increased the number of its bags which cost more than £1000 and upped the amount of products made in the UK — the company opened a new factory in Somerset during the summer as part of its plan to turn itself into an established luxury brand.

Guillon said a year ago only 4% of bags bought were priced at more than £1000 while in the past year 36% of bags sold have been above that level.