UK: Mulberry profit warning "underpins struggle"
Mulberry says it will introduce "more affordable new product"
Mulberry has issued its second profit warning since Christmas, with one analyst saying it underpins the struggle it has had trying to transition itself from a luxury brand to an uber luxury label.
In a trading update today (17 April), Mulberry said underlying profit before tax for the year to 31 March is expected to be around GBP14m (US$23.5m) - below current expectations, while revenue will be broadly in line.
As part of efforts to "reinvigorate" sales, the company will alter its pricing strategy by introducing "more affordable new product".
"Following the recent change in management, we are focussing on achieving sales growth through the reinforcement of our product offering at more affordable prices to meet the expectations of our loyal customers," said interim executive chairman Godfrey Davis.
"This will have short term financial consequences but is necessary to ensure the future strength of the Mulberry brand. The group remains profitable and cash generative, giving us the resources to invest for the future."
Conlumino analyst Anusha Couttigane, however, believes the profit warning is a result of tough Christmas trading conditions and sustained caution amongst international distributors.
"Mulberry's expansion plans have been a critical component of its growth story, but this has been slower than anticipated, with international wholesale orders struggling, and this has put Mulberry in a position where it now has to manage profit expectations."
In the UK, Couttigane added, Mulberry has "alienated price-conscious customers" willing to spend up to GBP500 but not upwards of it.
But with the return of its lower-priced offer, the luxury fashion business "should slowly see a restoration of its customer base in the UK", she says.
The group's share price slipped 0.6% to 705 pence at 10.34 BST today (17 April).
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