Luxury goods group Mulberry saw its share price hammered yesterday as it fell prey to heavy discounting in Britain and weak demand in parts of Asia.
The maker of £1,000-plus Bayswater and Alexa handbags issued its third profit warning in 18 months and admitted that retail sales had tumbled during the crucial festive trading period.
Takings close to home were hit by hefty discounting by rivals while trading in South Korea – the firm’s largest Asian market – was “significantly more challenging than anticipated”. Its trading update revealed a 7 per cent fall in retail sales in the eight weeks to 25 January.
The group joins other retailers such as Debenhams and Mothercare in warning over profits after a mixed Christmas on the high street.
But one of Mulberry’s closest rivals – luxury fashion house Burberry – has been able to offset difficult high street conditions thanks to soaring demand in China and a burgeoning online business, which sent its festive sales 12 per cent higher.
Analysts had expected Mulberry to post pre-tax profits of £26.9 million for the year to the end of March, against £26m a year earlier.
The warning means that the group will see another year of falling profits, which slumped by more than a quarter in the 12 months to last March. Chief executive Bruno Guillon is forecasting a pre-tax profit of about £19m in the latest period.
He said: “Due to tough trading conditions over Christmas which saw significant discounting across the market, Mulberry has experienced lower-than-expected UK retail sales which, together with wholesale order cancellations from Korea, will impact our profit this year.”
Independent retail analyst Nick Bubb said the transition from a British success story into a global brand did not appear to be going well.
“It’s all gone a bit wrong for poor old Mulberry since the spring of 2012, just after Bruno Guillon joined as CEO from Hermès, when its share price was nearly 2,500p and the market cap was getting on for £1.5 billion.”
The firm said in December that while 60 per cent of its bags were still on sale for less than £1,000, new offerings priced at up to £1,500 were increasingly popular. However, the group lost out to rivals who slashed prices in the run up to Christmas.
Shares last night closed down 27.3 per cent at 654p capping a tough period for the firm, which has also been left reeling by the departure of its renowned creative director Emma Hill last autumn.
It is still searching for a replacement for Hill, who was credited with turning the firm from a trusted briefcase and wallet maker into an international fashion powerhouse with a clutch of celebrity fans.
Sales rose by 3 per cent in the nine weeks to 30 November, but fell sharply in the following eight weeks to leave the figure 3 per cent lower overall in the first 17 weeks of its second half.
The figure includes international sales, which rose 40 per cent in the period, implying a far steeper decline in the UK.