Mulberry sees festive sales drop amid luxury spending slowdown

Handbag maker Mulberry has revealed a steep sales drop in its Christmas quarter as it held off from price cuts despite luxury shoppers reining in their spending.

The British high-end retailer said group revenues fell 8.4% in the 13 weeks to 30 December 2023, with retail sales down 1.5%.

Trading was particularly weak in the UK, with sales down 4% in the festive quarter, as Mulberry said the Government’s move to axe VAT-free shopping continues to take its toll.

Shares in the firm fell 7% in early trading on Wednesday.

It comes amid mounting signs of a retrenchment in the previously resilient luxury sector, with fashion house Burberry last week warning over profits after seeing the slowdown in demand worsen in December.

Wealthy shoppers are tightening their belts after rises in the cost-of-living and increases to interest rates globally.

Mulberry said it held firm on its strategy not to discount despite pressure from an "unusually high promotional environment".

It also confirmed that full-year results will be hit by extra costs of opening new stores across Sweden and Australia and other investments, including new technology systems, as it previously flagged.

Thierry Andretta, CEO of Mulberry, said: "In the run-up to Christmas, the macroeconomic environment continued to impact consumer spending in the luxury retail sector, which Mulberry was not immune from.

"Despite this, the group maintained its discipline and focus on a full price strategy against an unusually high promotional environment.

"In the UK, we continue to believe the lack of VAT-free shopping is impacting the retail landscape, as well as the hospitality, leisure and tourism sectors."

Mulberry’s shares have been under pressure for the past five months as clouds gathered over the outlook for luxury spending amid economic uncertainty.

It alerted in November that the economic climate had "deteriorated", making customers more cautious in their spending.

The firm posted widening losses for the half-year, to £12.8 million in the six months to the end of September from £3.8 million a year earlier.

Part of this was down to the large jump in some of its software costs, and the money spent opening new shops overseas.