December 6, 2017 / 7:47 AM / a year ago

Handbag maker Mulberry targets Asian growth as UK slows

PARIS (Reuters) - British leather handbag maker Mulberry (MUL.L) is betting on a push into Japan and China with new stores and online sales to expand overseas, as growth in its home market proves more sluggish in spite of an increase in tourist spending.

A model presents a creation at the Mulberry catwalk show during London Fashion Week in London, Britain February 19, 2017. REUTERS/Neil Hall

The company, which has tried to go back to its roots as an “affordable luxury” label over the past two years with lower-priced products, posted flat revenues for the six months to end-September and a widening pre-tax loss.

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 and 3 percent in the international business in that period from a year earlier.

But in the ensuing 10 weeks to Dec. 2, overseas like-for-like sales bounced 12 percent, outstripping growth at home. The company described the United Kingdom as “uncertain”.

Chief executive Thierry Andretta said that spending by foreign visitors in London was nevertheless buoyant and underlying trends were good, adding that Mulberry had focused on selling full-price items rather than discounted ones.

The label’s biggest push is now in Asia, at a time when rival luxury goods makers, including LVMH’s (LVMH.PA) Louis Vuitton or Kering’s (PRTP.PA) Gucci, are benefiting from revived demand from middle-class Chinese consumers in particular.

In Japan, Mulberry, which is majority-owned by Singapore billionaires Christina Ong and Ong Beng Seng, recently signed a new distribution venture and has opened five stores.

“Japan is really positive,” Andretta told Reuters, adding that Mulberry would look to grow its shop presence in China “little by little” in select locations while pushing its online business.

Under Andretta and designer Johnny Coca - who previously worked for Vuitton and Celine - Mulberry has been reversing an ill-fated attempt to go more upmarket with handbags that cost well over £1,500.

Some 75 percent of Mulberry’s products, around half of which are still made in the county of Somerset in southwest England, now retail at under 1,000 pounds, Andretta said.

Its newly-released Amberley bag was among the top two or three bestsellers, alongside its Bayswater model, which is often sported by celebrities including U.S. actress Meghan Markle, who is set to marry Britain’s Prince Harry next year.

Andretta said “it was too early to tell” whether there would be a “Meghan effect” on company sales.

Mulberry will spend more on redesigning its stores over the coming months even as it rolls out its digital presence. It is one of few fashion groups to be shifting its catwalk collections to make them immediately available online.

Reporting by Sarah White; Editing by Sudip Kar-Gupta and Gareth Jones

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