Luxury fashion company Mulberry Group has issued a profit warning on tough UK trading at Christmas and order cancellations in South Korea.

The UK-based business said total retail sales were down 3% in the 17 weeks to 25 January, and down 7% for the last eight weeks of that period.

International sales continued to rise – up 40% and 34% for the respective periods – but UK sales were hit by the tough competitive environment and substantial discounting over Christmas.

Mulberry also warned that “significant” cancellations of wholesale orders from South Korea would lead to a likely 10% drop in wholesale revenues for the fiscal year to 31 March.

This would in turn offset rises in retail sales, leaving total sales for the year broadly flat.

Coupled with costs associated with the company’s store opening programme over the last two years, Mulberry was now likely to record full-year pre-tax profits “substantially lower” than market expectations, it said.

“Due to tough trading conditions over the Christmas period which saw significant discounting across the market, Mulberry has experienced lower than expected UK retail sales which, together with wholesale order cancellations from Korea, will adversely impact our profit this year,” said company CEO Bruno Guillon.