LONDON (Reuters) - Falling tourist numbers in Britain dented sales by leather handbag maker Mulberry (MUL.L) at the start of its financial year, even as the company expands in markets in Asia where luxury rivals have prospered.
Mulberry is also exposed to the pressures on a British retail market that has seen big names at the lower end of the spectrum forced to shut stores and cut costs.
Mulberry — which has been going back to its roots as an “affordable luxury” brand with most bags priced under 1,000 pounds ($1,333) — on Wednesday reported a 7 percent drop in like-for-like retail sales in the 10 weeks to June 2.
Underlying sales in Mulberry’s home market, comparing stores that have been trading for a year or more, were down 9 percent in the period, compared with a 1 percent fall in the previous year.
Shares were down over 8 percent at 1145 GMT.
“The United Kingdom is really challenging,” Mulberry CEO Thierry Andretta told Reuters, pointing to the falling number of foreign visitors - a key revenue stream for luxury firms - in what he said was traditionally a low period for turnover.
Andretta said Mulberry was still positive on the British market, and investing in an expansion with a new store on London’s upmarket Regent Street due this summer.
“We are fully committed to the United Kingdom, we think it’s still a great opportunity,” Andretta said, adding Mulberry had opted not to heavily discount its products. “We are not playing the promotion approach that is now moving up in the United Kingdom.”
Department store House of Fraser is among British groups struggling to survive in a brutal retail environment, and closing outlets. Mulberry said five of its House of Fraser concessions would likely shut as a result.
The brand, which manufactures half its leather bags in Britain, is accelerating efforts to grow overseas in markets like China or Japan, with new stores and a big push in online sales.
Strong demand from Chinese shoppers, and particularly younger buyers, boosted sales at top luxury brands like LVMH’s LVMHA.PA Louis Vuitton and Kering’s (PRTP.PA) Gucci in the first three months of 2018.
Mulberry said on Wednesday it had signed a new venture in South Korea to develop its business there alongside SHK Holdings, and Andretta said the brand would present its next winter collection in Seoul.
Mulberry’s like-for-like international retail sales were up 1 percent in the 10 weeks to June 2, after growing 5 percent in the year to end-March. They were down 1 percent on a comparable basis in Britain for the full year.
The company reported full-year profit before tax up 36 percent to 11.3 million pounds, before taking into account expenses linked to its investments in Asia.
Mulberry said its new products aimed in part at a younger clientele were selling well, with designs by Johnny Coca, who joined in 2015 from LVMH’s (LVMH.PA) Celine brand, accounting for more than 50 percent of sales.
It said its 1,095 pound Amberley handbag, launched in 2017, was its new bestseller.
Editing by Alistair Smout and Keith Weir