Luxury handbag maker Mulberry issued its third profits warning in eighteen months, sending its share price down by 25 percent. The U.K.-based retailer estimates that sales in the eight weeks ending January 25 dropped 7 percent, attributable to a “deteriorated” stock market and cancelled wholesale orders in South Korea.
Wholesale order cancellations in South Korea are financially “significant,” according to a statement issued by Mulberry, and will likely lead to a 10 percent decline in sales for the year so far. As a result, pre-tax profits will “substantially” fall short of general industry expectations. Chief Executive Bruno Guillon said, “Due to tough trading conditions over the Christmas period which saw significant discounting across the market, Mulberry has experienced lower than expected U.K. retail sales which, together with wholesale order cancellations from South Korea, will adversely impact our profit this year.”
Mulberry has responded to its laggard sales by revising its overarching strategy, attempting to move even further upmarket to find shoppers with deeper pockets. Typically, the company sells handbags priced between $250 and $800, but has begun offering new lines that cost as much as $2,000. Mulberry, however, continues to underperform, and expects that its full-year pre-tax profit will reach about $26 million, compared to the $35 million it recorded last year. Even before the 25 percent downward spiral in share price, the retailer’s stock has dropped more than 20 percent in the last year.
In a half-year report issued in December 2013, Mulberry posted a 28 percent slide in pre-tax profit. In October 2013, the company issued a warning regarding its anticipated profits, which sent share prices careening down 24 percent.
Some industry insiders speculate that Mulberry has still failed to recover from the departure of its creative director, Emma Hill, last June. She is widely credited with building the brand into an internationally recognized purveyor of luxury handbags.