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Mulberry has warned that customers are shunning London for Europe after tax-free shopping was scrapped in the UK.
Chief executive Thierry Andretta said visitor numbers had plummeted in the capital, with tourists from the US and the Arab states heading to other big cities in Europe. “We are losing 45-50 per cent of our potential business [at Bond Street store] due to the end of the tax free,” he said.
His comments came as the UK luxury handbag maker swung to a half-year loss, sending the shares down more than 11 per cent in afternoon trading.
Andretta added that trading from the Bond Street store could become “unviable” as it also grappled with high rents and business rates in London.
Rival luxury UK brand Burberry also said this month that tourists were flocking to cities such as Paris and Milan, where tax-free incentives for international tourists made shopping cheaper than London.
VAT-free shopping was scrapped in the UK last year and was temporarily reintroduced by former chancellor Kwasi Kwarteng during his “mini” Budget, before it was scrapped again by the current chancellor Jeremy Hunt.
Mulberry group revenue fell 1 per cent to £64.9mn in the six months to October 1, and it recorded a loss before tax of £3.8mn compared with profits of £10.2mn the year before.
Andretta said profits had been hit by high energy bills at its leather goods factory in Somerset, south east England, and a squeeze on discretionary spending as consumers tightened their belts amid the cost of living crisis.
UK retail sales fell 10 per cent to £34.1mn, but sales in China were up 6 per cent in spite of its strict zero-Covid policy. International growth was supported by new store openings in the country, and in South Korea with the launch of a store and digital platforms, the company said.
Andretta said the luxury retailer was “still confident” about the future of the business in China, despite protests over its strict lockdown rules, but admitted the situation was changing in a “dynamic” way.