January 30, 2018 / 7:33 AM / in 5 months

Mulberry banks on UK heritage even as Brexit vote nudges up costs

* Mulberry manufactures 55 pct of leather goods in UK

* Import cost of raw materials has gone up after Brexit vote

* Brand fully committed to UK, could envisage third plant

* Mulberry also expanding online, in China

By Sarah White and Paul Sandle

LONDON, Jan 30 (Reuters) - Handbag maker Mulberry is committed to manufacturing in Britain even as it grapples with higher leather import costs since the Brexit vote, and the company could even consider opening another factory in England, its chief executive said.

Mulberry produces about 55 percent of its leather goods at two manufacturing plants in the west of England, and Britain remains its biggest market even as it expands overseas.

Raw material costs - such as leather from Italian tanneries - were now higher as a result of Britain’s 2016 decision to leave the European Union after the pound weakened against other currencies, CEO Thierry Andretta told Reuters in an interview.

“Every supplier we have is related to the euro or the U.S. dollar,” Andretta said. “This is something that is always a challenge for us because we are still committed to having two-thirds of our collection at (up to) 995 pounds, but it is becoming challenging.”

Under Andretta, who joined in 2015 after a string of profit warnings at the firm, Mulberry reversed an ill-fated attempt to go more upmarket. Around 75 percent of its leather goods now cost just under 1,000 pounds ($1,400), or less.

In spite of a tougher balancing act on costs, Mulberry was “fully, fully committed” to Britain, Andretta added, speaking on Monday.

The label - whose bags have been sported by celebrities including Prince Harry’s fiancee, actress Meghan Markle - trades off its UK heritage and the skills of its craftsmen.

“We want to continue this and I hope one day when we grow perhaps we will even consider opening another factory,” said Andretta, who used to run Italian fine jewellers Buccellati and has worked at labels like LVMH’s Celine.

Manufacturing bases outside Britain include Italy and Spain.

DIGITAL GENERATION

The brand is expanding sales overseas, branching into Japan with a partner.

Mulberry’s like-for-like retail sales, which compares stores that have been trading for a year or more, were down 1 percent in the United Kingdom in the six months to end-September and fell 3 percent overseas in that period. But international revenue growth sped up thereafter.

The label, majority-owned by Singapore billionaires Christina Ong and Ong Beng Seng, will roll out a China-based distribution centre later in 2018 to help it expand online shopping and speed up deliveries, Andretta said.

Revived spending from Chinese consumers, who account for around a third of luxury goods purchases worldwide, fuelled strong revenue growth at industry leaders like Louis Vuitton owner LVMH in 2017.

Mulberry is also trying to capture a younger clientele with updated designs and strategies. From February, its catwalk collections will be instantly available, rather than months later as is usual.

New designs like the Amberley bag and a revamped version of the brand’s classic Bayswater are now among bestsellers, Andretta said.

“We are growing strongly with the digital generation,” Andretta said. Sales of older bag models were slowing slightly, offset by growth in newer versions, he added. “The younger consumer is moving to the modern version of Mulberry.”

$1 = 0.7104 pounds Editing by Adrian Croft

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