Mulberry slipped into the red during the first half of the year but toasted the attractiveness of London after tourist shoppers drove a 10pc jump in sales.
The luxury group swung to a loss of £500,000 for the six months to the end of September after investing £1m in its new range by creative designer Johnny Coca who joined last year from Celine.
Mr Coca has been under pressure to replicate the success of Mulberry’s sell-out Alexa handbag. He has so far won plaudits for his studded Clifton designs and a lightweight revamp of the brand’s classic Bayswater replica handbag, which the company said was selling strongly.
Mulberry outlet, which makes half of its leather replica bags in Somerset, England, said that the weaker pound had increased the cost of its imported materials and running its overseas operations, which would result in a £1m hit.
Despite a number of luxury groups warning they will have to raise prices to cover the sterling slump, Thierry Andretta, Mulberry replica chief executive, said that the company would not return to his predecessor’s strategy of hiking prices.
“We are all totally committed of ensuring that 70pc of our replica handbags are between £500 and £995,” said Mr Andretta. “We are really happy about this and think we offer the best value for price out of any of our luxury rivals.”
The Mulberry boss said that with the macro environment being so uncertain Britain was becoming even more appealing to foreign visitors. “There is the level of the pound but I think there is less risk of London being a terror attack [compared to other European cities] and that is making it more and more attractive,” he said.
UK retail sales rose by 12pc during the period to £55.4m with like-for-like sales up by 7pc. During the last 10 weeks sales have risen by 4pc versus the same period last year but domestic demand has softened.
Mulberry also announced that is taking a majority stake in a new joint venture in North Asia with China’s Challice Limited to exploit opportunities in China, Hong Kong and Taiwan. The company said it would invest £3m in marketing costs over the next two years and would expect the entity to be loss-making for the first two years.