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Mulberry Issues Profit Warning

British firm blames slowdown in demand, product and marketing investments.

Mulberry Bond Street Store

LONDON — Accessories brand Mulberry Group plc is responding to tough times with old-fashioned British grit and forging ahead with planned investments in marketing and retail.

On Thursday, the company issued a profit warning for the fiscal year ending March 31, but said planned investments would not be scrapped or reduced.

Chairman and chief executive Godfrey Davis said Mulberry would still spend 8 percent of total sales, about 5 million pounds, or $9.7 million, on marketing.

All figures have been converted at average exchange rates for the six-month period to Sept. 30.

“We are building this brand for the long term, and have no plans to retrench,” he told WWD. “We have a strong balance sheet, a good customer base, and we will be looking for good deals and any opportunities that may arise during the next months.”

Davis added the company had no plans to reduce the price of its merchandise in response to the credit crunch.

The statement said year-end profits would be below last year’s figure of 3.4 million pounds, or $6.6 million, due to the slowdown in consumer demand and to the company’s strategy of investing in product development and international marketing.

The company also stressed it has zero debt following the repayment of a medium-term loan last February. Davis added that, going forward, the company would be facing the “adverse trend” of the weakening pound versus the dollar and euro.

For the six months to Sept. 30, Mulberry’s profits rose 9.6 percent to 893,000 pounds, or $1.7 million, from 815,000 pounds, or $1.6 million. Sales rose 29.3 percent to 27.8 million pounds, or $53.7 million, from 21.5 million pounds, or $53.7 million, in the period. The statement said U.K. store sales increased 21 percent.

Sales were strong until mid-September, Davis said, when there was a “marked change in climate” after the collapse of Lehman Brothers.

The slowdown continued into the fall: In the 10 weeks to Dec. 6, overall retail sales in Mulberry’s U.K. stores were down by 1 percent.

Stripping out the positive impact of new stores, U.K. retail sales were down 12 percent.

However, the company said spring wholesale order books are ahead 15 percent due to increased market penetration and new shop openings worldwide.

This fall, the brand opened at London’s Westfield mall and unveiled its first freestanding unit in the Middle East at the new Dubai Mall. Later this month, it plans to open a store in Athens. It plans to open units in malls in Jeddah, Saudi Arabia, Kuwait City and Doha, Qatar, in the spring.