Mulberry Asia, a new joint venture between the British fashion brand and Challice Limited, has announced plans to open four stores in Hong Kong, China and Taiwan and a Chinese language eCommerce site.
The move was announced along with the company’s half year results which saw sales rise 10 per cent, but the company posting a loss due to investments, mainly in a new collection.
Mulberry will cease its current distribution agreement with Club 21, although its new partner Challice shares the same ultimate ownership.
Mulberry Asia will locate its head office in Hong Kong from where it will manage all retail, digital fulfillment and wholesale distribution for the region. Challice will hold a stake of about 40 per cent in the new business.
The company says it expects to post losses for two years during its establishment phase, moving into profit in year three.
Mulberry CEO Thierry Andretta said the new venture would progress the group’s international strategy of developing its retail and omnichannel model “in a key luxury market where we see significant growth opportunity”.
Subject to a number of practical issues, including obtaining Chinese trading licenses, Mulberry Asia is expected to be operational from Spring 2017.
Honor Strachan, lead analyst with Verdict Retail, said Mulberry Asia was an impressive direction to take.
“It will allow the brand to better serve its customers in North Asia and provide it with a solid foundation to further grow its business in this region. However, investment in product design and creativeness must continue so that Mulberry stands out in the increasingly difficult and crowded Asian market.”
Meanwhile, while investment to create the new collection has had a negative impact on gross margin, down 2.4 percentage points to 59.1 per cent, it has successfully driven footfall into stores and turned its wholesale business around. Revenue was up 10 per cent in the half year, compared with an 11 per cent decline in the same period last year.
Strachan says modern totes and bucket bags have improved the desirability of Mulberry’s offer, appealing to a new, younger shopper demanding more on-trend innovative pieces but with the craftsmanship and quality credentials that the brand continues to leverage and showcase.
“Mulberry has achieved impressive UK like-for-like growth, despite tough 2015/16 comparatives, benefiting from international visitors taking advantage of the weak pound and high demand for British heritage brands. The opening of its new Covent Garden store was fortunate timing to showcase its new collections to this influx of lucrative shoppers,” said Strachan.
“Conversely, the devaluation of the pound has hit the sales performance in some of its tourism-driven stores in Europe and the US, and has led to higher UK production costs and running costs of overseas subsidiaries.”