Mulberry issues profit warning as wholesale revenues slip

The British luxury brand reported that in the six months to September 30 wholesale shipments to third parties were down 4% to £30m. However, during the period total revenue rose 6% to £76.5m and retail revenue jumped 13% to £46.5m as like-for-like sales grew 7%.

The Mulberry warning follows a profit warning from its rival Burberry in September.

In a trading statement Mulberry said wholesale shipments were down due to a more challenging environment in Asia and tough half-year comparatives. The company has also made a decision to rationalise some international wholesale accounts in order to improve the distribution network.

Primarily due to lower wholesale revenue, Mulberry now expects group revenue growth for the year to March 31, 2013 to be below market expectations. As a result of this, and the investment into international retail expansion, Mulberry expects full-year profits to be below last year. 

Espirito Santo analyst Richard Cathcart believes current pre-tax profit consensus of £43m will be downgraded by “at least 16%”.

Chief executive officer Bruno Guillon added: “The steps we have taken to improve the quality of Mulberry’s distribution network in both the retail and wholesale channels will result in the short-term slowing of sales growth. However, we firmly believe these steps are in the long-term interests of building Mulberry into a global luxury brand.”

In the UK retail sales were up 10% and Mulberry said UK full price sales performed in line with its expectations. Off-price sales in the UK have remained weaker, which the brand said reflects a strategic decision not to make product specifically for the off-price business.

International retail sales were up 41% and although the company has not met its expectations for the first half of the year it remains confident in the international expansion strategy.

Guillon said newly opened stores are performing “satisfactorily” and Mulberry is on track to open its target of 15 to 20 stores during 2012/13.

He added: “We continue to focus on creativity, craftsmanship and quality and in this context will start the construction of our second UK factory within the next few weeks.”