Mulberry has slipped into the red after investing more in new products and suffering a hit from additional foreign exchange costs on overseas subsidiaries.
The luxury accessories brand grew sales by 10% to £74.5m during the six months ended 30 September, but made a loss before tax of £0.5m compared to a profit before tax of £0.1m for the same period last year.
The firm said digital sales grew 32% during the first half, accounting for 14% of group sales.
Retail sales for the 10 weeks ended 3 December grew by 3% on a like-for-like basis, buoyed by tourist spend in London, although that has dampened in recent weeks.
Mulberry has signed an agreement with Challice Limited, which owns 56% of its share capital, to form a new entity to operate its business in China, Hong Kong and Taiwan. Challice is under the same ultimate shareholder control as Mulberry’s existing distributor in the region, Club 21.
Mulberry will hold 60% of the share capital of the new company, which will initially comprise four stores, wholesale and ecommerce, including a Chinese language site.
Mulberry expects foreign exchange movements to cost an extra £1m for the full year to 31 March 2017. It will spend an additional £2m on strategic investments in North Asia during the period.
“Mulberry’s new collection under the creative direction of Johnny Coca has been well received by our existing customers and a new audience,” said chief executive Thierry Andretta, referring to nine new bags launched since August.
“We have strengthened our balance sheet with tight inventory management leading to strong cash generation, enabling us to invest in international development and new products. The new business announced today in North Asia will progress our strategy of developing our retail and omnichannel model in key luxury markets.
“The UK and global outlook has become more uncertain since we last reported, however, we are in a good position to continue to build our business.”