LONDON — A slowdown in its home market and a declining wholesale business forced British accessories maker Mulberry Group plc to issue the latest in a string of profit warnings that have become a trend over the past 18 months.
The company said pre-tax profit for the full year ending March 31 is expected to be “significantly below current expectations” following a 17 percent drop in first half revenues to 64.7 million pounds, or $104.8 million.
At 11:55 a.m. CET, Mulberry’s share price was down 14.6 percent to 6.41 pounds, or $10.31, having recovered some ground. After the announcement, it fell 18.1 percent.
The retail business fell by 9 percent to 45.1 million pounds, or $72.6 million, with a decline in the U.K. offset by growth in international markets, while wholesale sales were down 31 percent to 19.6 million, or $31.5 million.
Godfrey Davis, who returned to the chief executive’s seat earlier this year in a bid to get Mulberry back on track, said that while he had anticipated a tough first half, there were some unexpected developments.
“The first half was always going to be tough because we changed the product strategy somewhat – and that’s gone according to plan,” Davis told WWD following the profit warning. He added, however, that the company was not anticipating the significant drop in U.K. and wholesale businesses.
“With wholesale, we haven’t lost accounts but people have been more cautious in buying,” he said, adding that in Mulberry franchise stores in Europe and Asia have witnessed a trend of fewer customers buying more.
As for the U.K., Mulberry suffered from a decline in footfall, particularly tourist shoppers, as well as challenging comparative outlet sales. Discounted inventories were being cleared at a high rate in the prior year and those sales are now normalizing.
Internationally — mostly in the U.S. and Europe retail sales were up 20 percent to 7.5 million pounds, or $12.1 million.
Davis added that the company has also been investing in disproportion to its size, according to plan. It has opened a raft of new stores over the past few years in North America, Europe and the Far East and plans to cut the ribbon on a Paris flagship store next spring, which will mark the end of the company’s accelerated investment program.
He said he expected the company to be slightly less profitable in that phase.
Looking ahead, Davis said that full-price sales in the U.K. are on the upswing, having risen 12 percent in September, and he’s encouraged by the overall sales trends he’s seeing.
In a note following Mulberry’s announcement, Barclays said it anticipates a 10 percent downgrade in full-year revenue to 148 million pounds, or $238.1 million, and 60 percent cut in profit before taxes to 4 million pounds, or $6.4 million. It is estimating a 1 million, or $1.6 million, loss in the first half.
In the year to March 31, Mulberry Group saw its profits plummet more than 50 percent to 8.6 million pounds, or $13.7 million, due to a series of one-off costs, and a dip in sales, which the company had warned about in the spring.
During the last fiscal year the company issued multiple profit warnings and saw both its chief executive and creative director leave.
It made an ill-fated attempt to move upmarket and compete with the big luxury brands, and Davis is now endeavoring to bring average price points down, re-position the brand and lure back the core customer.