Mulberry laments tough Hong Kong market

Tepid demand for luxury products in the once insatiable Asian markets is the only blemish on a remarkable comeback by British fashion brand Mulberry.
After a tumultuous 2015 that saw a change in leadership and a strategic U-turn on pricing strategy, luxury retailer Mulberry has posted first half results that indicate a return to stability and strategic clarity, bringing  the retailer back into profitability against a £1.1 million loss this time last year.
Mulberry revealed overall revenue growth of five per cent and like for like sales growth of 10 per cent. UK trading was particularly strong, with same store sale up 14 per cent, including digital sales.
However, strong store trading at home was offset somewhat by declining wholesale sales, largely due to decreasing demand in Asia.
Wholesale performance remains a thorn in the side of luxury players, with Mulberry admitting wholesale declines of 11 per cent.
“This could spell trouble ahead across the British luxury sector, including Mulberry,” observes Andrew Hall, consultant with retail analyst Conlumino.
The decline in Asian sales – particularly notable in China and Hong Kong – “will remain a worrying sticking point for the likes of Mulberry and rival Burberry,” says Hall.
“The crackdown on corporate ‘gift giving’ in China and Hong Kong has dampened demand for handbags and other designer luxury goods, as well as reducing the flow of affluent tourists from the area to international retail destinations. However, Mulberry will be hoping to renew appeal to this market in the second half of the year through the first collection produced by Creative Director Johnny Coca, to be showcased at London fashion week.”
“Previously we have expressed concerned over Mulberry’s inability to foster a viable identity of luxury British heritage; however, the retailer has become more proactive over this half year, being keen to stress the importance of the UK factories in delivering a British product – as well as having a positive impact on gross margins. In addition, Mulberry has begun to reinforce this identity through its handbag designs; looking forward, this should be applied across the product range to strengthen a luxurious, international appeal,” says Hall.
CEO Thierry Andretta has provided clear leadership, steering the retailer away from the inappropriate up-market prices toward more affordable price points.
“No doubt this strategic turnaround has bolstered store performance, with consumers showing a strong preference for RRPs below £1000, which the majority of Mulberry products now have. A more sensible pricing strategy is also driving digital sales; this has proven an encouraging area of growth for the rejuvenated retailer, with digital sales up by 20 per cent and now accounting for 12 per cent of group sales.”
Hall says despite the Asian market performance, Mulberry’s first half results paint an encouraging picture of a retailer growing on newly stabilised foundations.
“This has positioned Mulberry for a strong Christmas period, with the nativity spoof Mulberry Miracle video having been viewed over 1.7 million times and innovative gifting packages or ‘chests’ of Mulberry products attracting attention.
“This should help deliver a strong full year performance in 2016, although international reception to Coca’s first collection for the retailer will be critical to recouping a positive wholesale performance,” concludes Hall.

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.