Mulberry's shift back to affordable luxury sees sales up 5 percent

(Adds CEO comments, detail)

By Li-mei Hoang

LONDON, Dec 10 (Reuters) - British handbag maker Mulberry showed signs its plan to win back customers with more affordable products was gaining momentum, posting on Thursday a 5 percent rise in revenue and an improvement in its profit margin.

Mulberry, known for its classic leather bags, has spent the past year reconnecting with its roots in so-called affordable luxury, after an attempt backfired to become more exclusive with bags costing more than 1,000 pounds ($1,517), prompting a string of profit warnings.

"Trading is up and is in line with our expectations, so we are quite confident it will continue like this," Chief Executive Thierry Andretta told Reuters.

The company said total retail sales in the 10 weeks to Dec. 5 were up 5 percent on a like-for-like basis, though it acknowledged its full-year results would be dependent on the next few weeks of trading through Christmas and into January.

"Obviously there are a few important weeks to go between running up to Christmas and the New Year, but so far so good," said Chairman Godfrey Davis.

Mulberry said it had seen encouraging sales in its retail stores for the six months ended Sept. 30, which helped offset an expected decline in wholesale from a slowdown in orders from Asian retailers and its own distribution controls.

It (Other OTC: ITGL - news) reported underlying revenue of 67.8 million pounds in the first half of its fiscal year and swung to a pretax profit of 100,000 pounds from last year's 1.1 million loss.

Gross profit margin increased to 61.5 percent from 59.9 percent.

"The second half has started well with the first 10 weeks up 5 percent, a good figure in a tough luxury market especially in UK/London," Barclays (LSE: BARC.L - news) analysts, who are neutral on the stock, said in a note. ($1 = 0.6589 pounds) (Editing by Kate Holton and David Holmes)