Mulberry and Burberry warn of trouble ahead from fickle fashionistas


Laura Chesters
Wednesday 15 October 2014 00:53

The state of the luxury market was laid bare yesterday as Mulberry issued its third profit warning this year and its larger rival Burberry warned the outlook for the sector was getting tougher, prompting both stocks to tumble.

Mulberry – which is trying to reposition itself after a disastrous move upmarket –announced retail sales in this country had slumped 12 per cent in the six months to the end of September while overall sales dropped 17 per cent to £64.7m.

In response, its house broker Barclays slashed its 2015 pre-tax profit forecast by 60 per cent to £4m and its shares fell 10 per cent to 675p.

The British handbag maker – whose chief executive, Bruno Guillon, left in March after being blamed for an ill-fated decision to concentrate on expensive handbags – has now issued five profit warnings in two years and its shares have fallen 75 per cent since they were trading close to 2,500p in May 2012.

Godfrey Davis, the former boss who stepped in as executive chairman, has introduced cheaper bags and said the initial reaction to its recent Tessie and Cara Delevingne ranges was “positive”, helping sales improve.

“I am now confident that we have put in place the necessary changes to restore growth in the medium term,” he added. Mr Davis also hinted that he was making progress with the search for a new creative director after Emma Hill quit last year.

Sales in Mulberry’s wholesale arm, however, slumped by 31 per cent as shops across Asia and Europe bought fewer of its new products while they look to shift the older, pricier stock.

Burberry, meanwhile, announced underlying sales for the six months to the end of September had jumped 14 per cent to £1.1bn, with retail sales up 15 per cent to £748m and like-for-like sales up 10 per cent. Wholesale sales rose 13 per cent to £317m.

However, the FTSE 100 giant’s chief executive, Christopher Bailey, said he was “mindful of the more difficult external environment” and its shares fell 4 per cent to 1,425p.

Even the luxury giants in France and Italy are not immune to the slowdown. Last month Italy’s Prada revealed a 20 per cent fall in profit as the luxury sector was hit by the strong pound and a fall in tourists from China, Russia and the Middle East.

Yesterday Louis Vuitton’s owner LVMH reported a 4 per cent rise in sales for the nine months to the end of September to €21.4bn (£17bn), better than analysts expected but still well below the boom times of double digit growth.

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