Mulberry shares plunge after shock profit warning

 

Shares in Mulberry plummeted nearly 30 per cent in early London trading after the luxury brand issued its third profit warning under chief executive Bruno Guillon.

The Somerset and London-based group - famous for its tie-ups with celebrities such as Alexa Chung and Lana Del Rey - warned annual profits would be well below market expectations, blaming heavy discounting in the UK by rivals over Christmas.

Chief executive Bruno Guillon - who joined in March 2012 from upmarket label Hermes - said that, despite rival brands discounting from early December, Mulberry “decided not to discount until December 26 and this hurt us.

“But I do not want to enter a discounting war. It will hit margins.”

Sales in the 8 weeks to January 25 - including Christmas - fell 7 per cent compared to the same period a year ago, contributing to a 3 per cent decline in the 17 weeks to January 25.

Analysts had forecast Mulberry’s pre-tax profit for the year to March 2014 would be £26.9 million, but Guillon said it would now be around £19 million.

The warning saw shares tumble 250p - or 27 per cent - to 654p. The stock had reached an all-time high in May 2012 of 2472p, but since then have fallen more than 73 per cent.

Mulberry also said order cancellations from its Korean customers meant wholesale sales are likely to be 10 per cent down on a year ago which would wipe out retail sales growth.

The brand is still searching for a new designer and cancelled its show for London Fashion Week next month after creative director Emma Hill left in 2013 after six years at the group.

Guillon, who has been trying to turn the brand from a quirky English firm to a global luxury name. said the group has a shortlist of candidates and should be able to reveal a new creative director within two months.

Without a designer it has struggled to find the next “It bag” and sales of its most recent hit – the Alexa bag - have waned since their peak.

Guillon said: “Yes it would be great to have the next It bag but behind the scenes we are investing and changing and the future supply chain will be in place. So now what we need is to bring back the excitement to the brand.”

He said they recently hired a new brand director and when the new designer joins he hopes the group will be back on track.

He said: “I am disappointed and the shareholders are disappointed it is taking time. I would like to go faster. But the shareholders understand and we are taking the right steps. This is a long term project.”

The group has only a small number of shares in free float with Singapore's Ong Beng Seng, wife Christina Ong and family owning more than 56 per cent of the company.

Mulberry follows US brand Coach which earlier this month issued a disappointing update with US comparable sales down 13.6 per cent for the second quarter.

Mulberry has been focusing on British made products with the recent opening of a new factory. Two years ago less than 20 per cent of products were made in the UK and now 50 per cent are made in Somerset.

Guillon said the brand needs to communicate this more and has launched new marketing initiatives with expansion focused on the US and Europe.

Although the group has been criticised for raising prices he said the core collection consists of bags between £700-£1000. He said compared to brands made in Asia his products were a “super-bargain”.

But Luca Solca, luxury analyst at Exane BNP Paribas, said: “Mulberry has tried to move upmarket - emulating recent successes by brands like Bottega Veneta. The problem Mulberry faces is that its credibility in the high-end is weak.

'I was selling Mulberry bags well when they cost EUR 800, but nobody wants to buy them at EUR 2000' a leading multi-brand European retailer told me today. I fear that the repositioning plan by Mulberry is over-ambitious and lacks a bedrock to project a credible high-end image.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat