Mulberry makes plea for return of VAT-free shopping as wealthy shun London
The luxury handbag maker revealed UK retail sales plunged 10% over its first half.
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Your support makes all the difference.The boss of luxury handbag maker Mulberry has urged the Government to reinstate VAT-free shopping for tourists as he warned wealthy shoppers are shunning London for Paris and Milan.
Thierry Andretta, chief executive of Mulberry, told the PA news agency that the Government’s move to end tax-free shopping in January last year has hammered trading in its high-end stores in the capital, particularly its Bond Street outlet.
It is compounding a slowdown in luxury spending as the cost-of-living crisis begins to take its toll across all sectors, with the group revealing its UK retail sales plunged 10% in the group’s first half.
The wealthy are still buying but they're not choosing to buy in London
Shares in Mulberry tumbled as much as 28% after opening on Wednesday before paring back to stand around 11% lower as it revealed it swung to a half-year loss.
Mr Andretta said its Bond Street store – which has sky high rents and business rates – used to see up to 50% of sales from international tax-free shoppers, but this has been decimated to less than 5%.
“Some wealthy people now prefer to go shopping in Paris or Milan or other capitals – it’s really hitting us.
“The wealthy are still buying but they’re not choosing to buy in London,” he added, saying it was also hurting hospitality and theatres in London as some tourists take their spending elsewhere.
“(VAT-free shopping) is something we would like the Government to reinstate,” he said.
VAT-free shopping for tourists was axed from January 2021, only for former chancellor Kwasi Kwarteng to reintroduce it in the disastrous mini-budget, before new Chancellor Jeremy Hunt made another U-turn and reversed the planned reinstatement.
Mulberry revealed it swung to a pre-tax loss of £3.8 million for the six months to October 1 against profits of £10.2 million a year ago.
Mulberry saw UK retail sales drop 10% to £34.1 million, with trading in the second quarter particularly impacted as the economic uncertainty and cost crisis knocked shopper confidence, with the lack of VAT-free shopping also taking its toll.
Its profits drop came despite the group raising prices twice, in March and September, to offset its soaring costs and energy bills, which together saw its prices lifted by around 7% globally.
Mr Andretta said there may a further small price rise to come for winter 2023, but that this was yet to be confirmed.
We are confident in our ability to execute our strategy and to continue to invest across the group for our future growth, in spite of the challenging economic and geopolitical backdrop
Results a year earlier were boosted by business rates relief support as well as profits on the sale of a shop lease in Paris, but even with these stripped out, Mulberry sank to an underlying £2.8 million half-year loss from profits of £4.5 million.
It said online UK sales also fell 24% as customers switched back to shops.
It fared better in China where sales rose 6% despite Covid-19 restrictions, helping limit the decline in overall group revenues to 1%.
Mulberry said trading improved in the eight weeks to November 26, though it warned over ongoing cost and economic pressures.
It said price rises were made to “ensure we make no compromises on the quality of our product” and protect profitability in the face of rocketing inflation.
Mulberry’s boss is also leading a strategy refresh, including better integrating online and shop offerings, driving sales internationally and in Asia Pacific particularly and also moving away from the franchise model to full ownership of stores.
Mr Andretta said: “We are confident in our ability to execute our strategy and to continue to invest across the group for our future growth, in spite of the challenging economic and geopolitical backdrop.”
“We are well placed for the festive trading period,” he added.