Sausage roll seller Greggs and upmarket leather goods retailer Mulberry have shown how the fortunes of sector players have diverged amid the challenges posed by inflation.

Mulberry, which has stores in Glasgow and Edinburgh, is fighting to retain its independence following a slump in sales while Greggs is set to continue its rapid expansion on the country’s high streets amid surging demand.

Founded in Somerset in 1971, Mulberry claims to have grown to be the largest maker of luxury leather goods in the United Kingdom.

Its website advertises £1,395 handbags.

However, the company has received an unwelcome takeover bid from the Frasers business developed by Mike Ashley a week after posting £35 million losses.

The loss followed a 4% fall in sales in the year to March 30. Mulberry said this reflected the significant challenges faced by the luxury sector “with markets across the globe facing a tightening of consumer spending”.

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Conditions appear to have got even tougher since the end of the financial year.

Group revenue fell 18% in the 25 weeks from March 30, compared to the same period last year.

Mulberry’s experience provides a further sign that a long boom in spending on luxury goods by aspirational consumers has ended. The surge in inflation fuelled by Russia’s war on Ukraine has prompted many shoppers to tighten their belts leaving luxury retailers increasingly reliant on the wealthy to keep the tills ringing rather than wannabes.

In July Burberry issued a profit warning following a 22% fall in first quarter sales.

Burberry and Mulberry are hoping that new chief executives will help them do better. The fall in the inflation rate that followed interest rate increases by the Bank of England could help boost consumer confidence.

However, prices in general remain well above pre-pandemic levels. Wages have not kept pace leaving budgets under pressure for many.

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By contrast, Greggs has maintained strong growth helped by offering what are perceived to be value for money foods, which many people eat on the go.

In a trading update the group said total sales had increased by 10.6% In the quarter to September 28.

While retailers are retrenching across the UK, Greggs has opened 86 stores in 2024 net of closures, taking the total to 2,559, including 296 in Scotland.

A further 60 or so stores could open in the UK by the year end.

Mulberry closed a store on London’s smart Bond Street last year.

Amid increases in the cost of ingredients, Greggs has used its scale to help it keep selling prices down while maintaining margins.

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The company has employed savvy marketing, digital sales technology and effective product development to enable it to respond to changes in the market and consumer tastes.

Greggs helped build its appeal among young consumers by developing a vegan sausage roll that can be had for £1.25.

Although coffee giant Starbucks has found sales wilting as consumers balk at the price of its complicated drinks, Greggs hailed the benefit of a Pumpkin Spiced Latte it developed that sells for £2.50.