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LONDON — A profit warning pushed Mulberry Group’s shares down 23.8 percent on the London Stock Exchange Wednesday, although the brand’s chief executive officer Bruno Guillon remains upbeat about the British brand’s prospects.
This story first appeared in the January 30, 2014 issue of WWD. Subscribe Today.
Mulberry shares closed down at 7.05 pounds, or $11.55, after the company said pretax profits in the year ending March 31 would be “substantially below” market expectations, due to lower-than-expected sales growth, a tricky Christmas season and costs related to international store openings.
Last month, analysts at Barclays had projected pretax profits of 27 million pounds, or $44.8 million, and after-tax profits of 18.9 million, or $31.3 million, for the 2013-14 fiscal year.
All figures have been calculated at current exchange rates.
Mulberry, which added that sales will likely be flat against last year’s 165 million pounds, or $273.6 million, pinned the blame on lower-than-expected U.K. retail sales — a result of tough pre-Christmas trading conditions — and wholesale order cancellations from South Korea.
“We did not discount until after Christmas — but everybody else did. It was a competitive pre-Christmas environment, and a real challenge. Everybody was affected,” said Guillon in a telephone interview.
As for South Korea, Mulberry said that in recent days it had become clear that wholesale order cancellations from South Korean customers were likely to be “significant,” so the company now expects wholesale sales for the year to be down about 10 percent compared with last year.
Korea generates 20 percent of Mulberry’s wholesale business, and Guillon said Mulberry’s strategies in that market need to change.
“We grew very fast in Korea — we have 24 points of sale in department stores there — and the local market has become quite difficult now. Brands are overdistributed there.
“Our business was mainly based on one bag — the Alexa — and we need to extend the brand, to push other bags and messages, such as our Made in Britain DNA,” he said.
Overall, he said, Mulberry needed to bring “excitement and attention to the brand.” He pointed to the company’s new factory in Somerset, England, which, together with the first plant, now makes 50 percent of the brand’s bags.
“When I arrived here, that figure was less than 20 percent. There are major changes going on in the company, and we are looking at the very long term, and at making Mulberry successful inside and outside the U.K.,” he said.
In the statement, Guillon said Mulberry continues to be cash generative and to invest in the ongoing process of international expansion.
Later this year, Mulberry will open a 2,500-square-foot store in Las Vegas and a Paris flagship on the Rue Saint-Honoré.
The company said that in the 17 weeks to Jan. 25, total retail sales were down 3 percent, while international retail sales were up 40 percent.