Mulberry bags a surge in sales but retail rivals suffer slump

• Models show off Mulberry's wares, including handbags that usually sell for between 500 and 900. The group reported a 66% leap in sales over the Christmas period Picture: Getty

Mulberry's announcement came as the latest official retail figures showed the worst December performance since records began.

The Office for National Statistics said UK retail sales for December were flat on the year, and fell 0.8 per cent on the month.

Food and fuel saw the sharpest fall in sales, blamed on rising prices and the cold weather.

Stripping out the drop in fuel sales, caused by disrupted travel, the decline was less steep than economists had predicted. Internet sales continued to grow, and now account for about 10.6 per cent of total retail sales, excluding fuel.

Luxury brands have bounced back strongly from the recession, driven by surging demand in Asia.

Mulberry's figures were especially impressive considering it sold a larger proportion of its handbags at full price. Like-for-like growth was 70 per cent across the company's full-price outlets in the six weeks to January 15, while discount outlet sales rose 34 per cent,

Mulberry chief executive Godfrey David said demand was particularly strong in Hong Kong, Singapore and South Korea but British consumers were also still buying its handbags, which mostly cost between 500 and 900.

The Bath-based group is having to expand its factory output by nearly a third to help it meet soaring demand, particularly from international consumers.

It said last month that interim profits trebled to 4.7 million, adding it was unable to match demand in the UK and overseas, with sales to Asia up 180 per cent in the half-year.

David said there had been no noticeable impact from the rise in VAT on 4 January.

Mulberry's latest sales figures follow those of larger British luxury group Burberry, which said on Tuesday its full-year profit would be at the top of expectations.

John Lewis also reported no impact from the tax hike. It said yesterday that department store sales rose 4.1 per cent during its first full week of trading with VAT at its higher rate of 20 per cent.

Company officials described the latest week of its clearance period as positive but admitted it was helped by comparisons with the snow disruption experienced a year earlier. Excluding VAT, sales were just 1.9 per cent higher.

John Lewis's haul of 55.8m for the week to last Saturday represented a slowdown on the 38.7 per cent rise seen the previous week, when it benefited from the bank holidays and a surge in business ahead ofz the VAT rise.