Luxury handbag firm Mulberry warns on profit again

British luxury handbag maker Mulberry said full-year pretax profit would be significantly below expectations after a slump in first-half trading added to the disruption of a product overhaul.

Mulberry had warned in June of a tough year ahead as it shifts to a lower price strategy following an ill-fated attempt to move upmarket that hit sales and led to chief executive Bruno Guillon’s exit in March.

On Tuesday, in the latest in a string of profit warnings, the firm said tougher than expected trading conditions had added to its woes, with falling levels of tourist shoppers hurting its core UK business.

Revenues for the six months to September 30th fell 17 per cent to £64.7 million, the firm said, with retail sales down 9 per cent and wholesale sales down 31 per cent.

Analysts at Barclays slashed their full-year pretax profit forecast by 60 per cent to £4 million. That compared with £14 million a year ago, itself a near halving from the year before.

“Moving the brand to higher pricing points had clearly taken its toll on sales with the group responding by reverting back to its roots,” the Barclays analysts said in a note, adding they expected new bag launches to help the firm’s second-half trade.

Mulberry, like rivals Louis Vuitton and Gucci, is struggling to compete against more accessible, trendy fashion brands such as Michael Kors which give customers the look and feel of luxury at a fraction of the price.

To better compete, the firm is strengthening its product offering at a price range of between £500 and £800.

Mulberry said sales trends had improved over the first half, indicating it was taking the right steps to restore the business to growth.

The firm added its flagship Paris store, due to be opened early next year, would mark the end of its investment in new stores, which has seen it expand its footprint globally.

Reuters