The collapse of House of Fraser and a fall in the number of tourists to Britain have hit annual profits at Mulberry.
The luxury British handbag maker, which sells its products for about £1,000 apiece, lost £3 million as a result of the department store chain going into administration in August. This contributed to a pre-tax loss of £5 million for the year to March, compared with a pre-tax profit of £6.9 million last year, as UK revenue fell by 6 per cent to £121.6 million.
Thierry Andretta, 60, chief executive, blamed disruption at House of Fraser and challenging market conditions in Britain for the disappointing performance. “It was fully unexpected,” he said. “We are still waiting for better clarity from House of Fraser on how many stores will be kept but we’ll continue to trade with them.”
Mulberry was conceived in 1971 by Roger Saul, its founder, at a kitchen table in Somerset, where two factories continue to make about half its bags. The group owns 103 stores and has 22 franchised outlets in 25 countries.
Most of Mulberry’s concessions outside London were in House of Fraser shops but sales failed to recover after the chain was bought from administrators by Mike Ashley’s Sports Direct. Mulberry has cut the number of House of Fraser locations it works with from 19 to 15.
Mr Andretta said the company’s expansion in Asia, particularly in Japan and South Korea, had also hit profits. “Our focus is on Asia because the growth in luxury consumption is coming from there,” he said. “Forty per cent of sales in London are to tourists and mostly they are coming from that region.”
However, Chloe Collins, senior retail analyst at GlobalData, the analytics group, said that Mulberry’s problems were more deeply rooted. “The luxury players are still at risk. People don’t have the money to spend on these luxury purchases anymore.”
She added that Mulberry’s move from a wholesale to concession model at John Lewis had knocked profits in the short-term — it cost £1.3 million — but that the more upmarket department store chain would prove a better fit for the brand than House of Fraser.