14th Oct 2014 07:52
LONDON (Alliance News) - British fashion retailer Mulberry Group PLC saw a quarter of its market value wiped off Tuesday morning, after it issued a fresh profit warning in the wake of weak demand and sales in the first half, and said it now expects its full year profit to be significantly below expectations.
In a statement, the luxury bags, clothes and accessories maker gave a bleak outlook for the remainder of its financial year, after it said revenue in the first half fell 17% to GBP64.7 million, compared with GBP78.1 million the prior year, and warned its pretax profit for the full year to end of March 2015 will be "significantly below current expectations".
"The first half was expected to be particularly difficult, with it taking some time for the measures implemented after the April management change to take effect. Actual trading conditions have been more difficult than expected, in part due to the continuing headwinds affecting the luxury sector," the company said in a statement.
Mulberry came under scrutiny under the control of former Chief Executive Bruno Guillon, who left the company in March after presiding over two years of profit declines. Guillon, who joined the company in 2012 from luxury French brand Hermes, was blamed for pricing the retailer out of the market, by raising its prices too quickly.
Under Guillon, Mulberry issued a profit warning four times in just two years, and its reputation was damaged. Last year, Mulberry reported a pretax profit of only GBP14.0 million for the year, just a fraction of the GBP36.0 million profit it posted two years before that.
In a bid to restore the business to growth, earlier this year Mulberry introduced lower-priced "more affordable" luxury goods, in an attempt to reinvigorate sales, using popular catwalk model Cara Delevingne as a brand ambassador.
In its statement Tuesday, Mulberry said that whilst sales trend have improved slightly, its retail business saw sales fall by 9% to GBP45.1 million in the six months to end-September, down 13% on a like-for-like basis. A steep decline in UK sales was only partly offset by growth in international markets. It said UK full price sales were down 12%, hit by a decline in footfall, particularly tourist shoppers, while international sales were up 20%.
"I explained that the impact would be progressive and should produce benefits over the medium term. The new products are beginning to reach our shops with the launch of the Cara Delevingne bags at the beginning of September and with further new product being offered in our shops during November," said Executive Chairman Godfrey Davis in the company's statement Tuesday.
Mulberry said wholesale sales declined by 31% or GBP9 million in the first half of the year to GBP19.6 million, hit by what it said was a combination of inventory reduction and conservative ordering by its Asian and European franchise partners.
"We expect the wholesale sales pattern to continue for the remainder of this year before improving during 2015/16 as partner store sales stabilise and their inventories reduce," the company said.
Mulberry said it will release its interim results on December 4.
"The group remains profitable and cash generative, giving us the resources to invest for the future. Despite the current challenges, I remain confident that we will build on Mulberry's solid foundations and unique brand positioning in the luxury market to restore growth in the medium term," said Davis.
In a note to clients, WH Ireland said it was forecasting that Mulberry would report a pretax profit of GBP11.2 million in the current financial year, but has now cut the forecast to GBP3.5 million. The broker also cut its 2016 profit forecasts.
Mulberry shares were trading 23.4% lower Tuesday morning at 575.00 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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