British luxury handbag and fashion company Mulberry Group Plc today said operating profit more than halved in the first half of its financial year after it increased its expenditure on advertising and marketing to raise the brand's global image.

For the six months to 30 September, the AIM listed firm said operating profit fell to GBP1.1m (US$2.25m) from GBP2.5m in the same period last year.
Sales increased by 4% to GBP21.5m in the 26 week period, up from GBP20.7m in the same period last year, with UK retail like-for-like sales rising by 11%.

Godfrey Davis, chairman and chief executive, said the Group is making "solid progress" as it develops into a global luxury brand.

"We continue to invest in building our presence not only in the UK and Europe but also in new markets such as the USA, Asia and the Middle East. This strategy is supported by our strong underlying profits and cash flow."

He said administrative costs rose by GBP2.1m in the interim period, due to opening new shops and concessions and promoting the brand.

Gross profit margin increased to 57.4% from 56.5% in the same period last year, as more sales were channelled through Mulberry owned shops and concessions.

Davis said the company expects to see sales continue to grow since there is "a level of insulation amongst luxury consumers from the vagaries of the high street."

But he added: "We are not immune to factors that affect general retailing conditions and the Christmas period, as always, will have a substantial impact on our year end results."

So far the results look promising, with UK retail like-for-like sales for the nine weeks to 1 December 2007 up 9%.

The company also said that spring/summer 2008 accessories wholesale order books are up 6% on the previous year.

Earlier this week Mulberry appointed Emma Hill, a British designer who has worked on the accessory lines at Gap, Chloe and Marc Jacobs, as its new creative director.