Shares in international luxury leather goods group Mulberry, best known for its upmarket bags, slumped this morning by 23% after it warned that annual profits are likely to be lower, partly due to a sales slowdown in the Far East.
The group, based in Chilcompton, near Midsomer Norton, said its wholesale shipments were down 4% compared to the same period last year. However, in a trading update today it said UK sales were up 10% and international sales by 41% – although this increase was lower than expected.
The business, whose leather bags are often seen on the arms of celebrities and supermodels, said annual results for the year to the end of next March would be hit because of a strategic decision to rationalise some international wholesale accounts to improve the quality of its distribution network, a more challenging environment in Asia, which has resulted in cautious ordering by franchise partners, and tough half year comparatives.
Chief executive Bruno Guillon said: “Mulberry’s core UK retail business and key wholesale accounts continue to perform well in the context of a more challenging external environment. Although international retail sales are behind expectations, newly-opened stores are performing satisfactorily and we are on track to open our target of 15-20 stores during 2012/13.
“The steps we have taken to improve the quality of Mulberry’s distribution network in both the retail and wholesale channels will result in the short term slowing of sales growth. However, we firmly believe these steps are in the long-term interests of building Mulberry into a global luxury brand.
“The Mulberry brand continues to gain recognition globally and we remain very confident in the outlook for the business. We continue to focus on creativity, craftsmanship and quality and in this context will start the construction of our second UK factory within the next few weeks.”
Total revenues for the six months to September 30 climbed 6% to £76.5m, with retail revenues up 13% to £46.5m, although wholesale shipments to third parties were 4% lower at £30m.
Mulberry has recently opened stores in San Francisco, Washington DC, Berlin and Frankfurt Airport.
