Somerset, England–On the heels of a similar warning by fellow British luxurygoods brand Burberry, Mulberry Group today predicted a lower full year profit and sales as wholesale revenue declined in the first half of the year. Shares of the British leathergoods brand plunged nearly 28% upon the news.
Mulberry reported that first half revenue rose 6% to 76.5 million pounds with 13% growth in retail revenue to 46.5 million pounds.
Total United Kingdom retail sales increased by 10% in the six-month period, but sales at its outlets, which account for about 20% of U.K. sales, were off by 10 to 15%. Its U.S. sales were hit by lower demand for its iconic Alexa handbag. International sales were up 41% but despite the big jump, they failed to meet Mulberry’s expectations.
Wholesale shipments fell 4% in the period, which Mulberry attributed partly due to changes to wholesale accounts in order to improve the quality of its distribution network.
The company also noted “a more challenging external environment in Asia, resulting in cautious ordering by franchise partners” for the drop in wholesale trade.
“Mulberry’s core U.K. retail business and key wholesale accounts continue to perform well in the context of a more challenging external environment,” said Bruno Guillon, ceo. “Although international retail sales are behind expectations, newly opened stores are performing satisfactorily and we are on track to open our target of 15 to 20 stores during 2012/13.”
Primarily due to lower wholesale revenue, Mulberry now expects group revenue growth for the year ending March 31, 2013 to be below market expectations. “As a result of this, combined with the previously highlighted investment being made in international retail expansion, we now expect full year profits to be below last year,” Mulberry said.
However, Mulberry said its business continues to be strongly profitable and generate significant cash to fund its future expansion.
“Sentiment is not fantastic in Asia,” added Roger Mather, Mulberry’s finance director who warned the slowdown in China could result in fewer Chinese travelers abroad buying luxurygoods.