Luxury retailing's resilience to the economic downturn has been called into question after Mulberry posted a pre-tax loss of £3.8 million for the six months to October 1.

The leather goods and accessories group, whose handbags can cost up to several thousand pounds each, said sales in its home market in the UK fell by 10 per cent as inflationary pressures and weak consumer confidence came to bear. Overall trading improved during the eight weeks to November 26, though there remains "ongoing uncertainty in the economic and geopolitical environment".

Mulberry increased its prices twice, in March and September, to offset soaring costs. The group said this would “ensure we make no compromises on the quality of our product” while also protecting profitability.

The pre-tax loss compared to a profit of £10.2m in the same period a year earlier. Group revenue edged 1% lower to £64.9 million.

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“We have delivered a resilient performance across the group, supported by strong international demand and continued investment in the UK," chief executive Thierry Andretta said.

“Mulberry has a distinct brand identity, combining British heritage with innovative products and modern craft. What helps set us apart is our commitment to sustainability, as articulated in our ambitious Made to Last manifesto, in which we announced our intention to become Net Zero by 2035."

While UK retail sales fell 10% to £34.1 million, sales in China increased by 6% despite Covid-19 restrictions. As a result, sales in the Asia Pacific region rose by 1% to £11.9 million.

Russell Pointon, director of consumer research at Edison Group, said recent political unrest in China may bring that country's zero Covid policy into question. The potential easing of restrictions could give Mulberry the opportunity to continue expanding its retail presence in there.

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However, he added:"Whilst Mulberry’s last set of results pointed to the brand's and indeed the luxury market’s resilience in the face of macroeconomic headwinds, this set of half year results indicates that the industry may be starting to feel the pressure."

Mr Andretta told reporters that the UK and London in particular has not seen the level of recovery that other European countries and cities are enjoying. This is in part due to the lack of tax-free shopping, which is driving rich tourists to other destinations.

Tax-free shopping came to an end in the UK after Brexit, but still exists in mainland Europe where tourists can reclaim VAT on their purchases. Mulberry is asking the UK Government to review what impact the loss of tax-free shopping is having on London and the wider retail world.

Those concerns aside, Mr Andretta said Mulberry is "well placed" for the festive season and making good progress in each of its four strategic pillars of omnichannel distribution, international development, innovation and sustainable lifecycle.

"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," he said. "We are well placed for the festive trading period and will continue to drive the business forward to the benefit of all stakeholders."

Shares in London-listed Mulberry closed yesterday's trading 8% lower, down 23p at 262p, a partial recovery from a decline of 20% earlier in the day. The stock was valued at more than 1,000p per share five years ago.