British luxury brand Mulberry posted a drop in annual profit on Wednesday on the back of start-up costs for its operations in Asia, as it announced a new business agreement in South Korea.
In the year to 31 March 2018, reported pre-tax profit fell to £6.9m from £7.9m after accounting for the costs relating to Asia, but revenue edged up 1% to £169.7m. Retail sales rose 3%, with the UK broadly flat and international sales 20% higher.
Chief executive Thierry Andretta said: "We have made significant progress during the year on our international strategy, creating new Mulberry subsidiaries in China, Hong Kong, Taiwan and Japan. We are also pleased to announce today the formation of a new majority owned venture to develop the business in South Korea. Our international business is growing and following the completion of this set up phase in Asia, we will focus on omni-channel, digital partnerships and marketing investment in the region.
"Following another period of cash generation, our balance sheet is strong. Although the UK market remains challenging, we will continue to invest in our strategy to develop Mulberry into a global luxury brand to deliver increased shareholder value."
As far as current trading is concerned, the company said retail like-for-like sales were down 7% in the 10 weeks to 2 June as growth in international markets was offset by weakness in the UK. International retail sales were up 1% but UK sales were 9% lower as the retail environment became more challenging, with lower domestic footfall and a reduction in tourists since January 2018.
Also on Wednesday, Mulberry said it was joining up with SHK to form a new majority=owned entity to operate the group's business in South Korea.
Mulberry will own 60% of the share capital of the newly-created entity, while SHK will own the rest.
The new business - Mulberry Korea - is expected to start trading by autumn 2018. The group reckons it will incur costs of £3m during the year to set up the business, which will be based in Seoul.