Pop: Mulberry's bubble threatens to burst

Profits have dropped by more than a quarter at the luxury retailer - driven by flagging sales in the Far East.

by Emma Haslett
Last Updated: 19 Jun 2013
The last few years have been incredibly kind to the UK’s luxury manufacturers, which have seen huge growth in Asian markets as Chinese buyers went berserk for all things ‘heritage’.

But the trend for ‘Made in Britain’ fashion looks like it’s on the wane, after Mulberry reported its first fall in profits for the first time in four years. The manufacturer, best known for its (very pricey) handbags, said this morning that full-year pre-tax profits had dropped by 28% to £26m, driven by falling demand from Asian wholesale suppliers.

The good news was that sales had risen by 6% on a like-for-like basis to £107.2m – although that was largely down to a 12% price rise at the business.

It hasn’t been an easy few months for Mulberry chief exec Bruno Guillon. In the past year, he has been forced to issue three separate price rises, pointing out that tourists had failed to buy bags at the more expensive end of its range over Christmas. And don’t forget that this is over the period of the Olympics, which many retailers had hoped would help pull them out of the doldrums.

Last week creative director Emma Hill – the woman responsible for the must-have satchel-esque ‘Alexa’ bag quit amid rumours she had fallen out with Guillon. Hill is credited for helping to turn Mulberry from a little-known Westcountry bag manufacturer into a global brand, so her absence will be felt.

At least Guillon can take solace in the fact that Mulberry isn’t the only luxury British brand having a tough time. In September, Burberry issued a profit warning, voicing its own worries about China. And yesterday, it was revealed that chief executive Angela Ahrendts had earned £10m (roughly the price of a Burberry trenchcoat, then) less than the year before – although Burberry stressed that this was because she had cashed in fewer shares.

Nevertheless, this suggests luxury brands’ gilded existence in China may be about to come to an end. Other markets with a reliance on the Chinese market should take note. Fashion may be fickle, but consumers in the far east are clearly tightening their (made in China) belts – and it won’t just be handbags that suffer.

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