This just isn’t a good day to be in handbags. As Burberry reports slowing growth, fellow fashion berry Mulberry issued a profit warning today, and a rather grave one at that. Revenues for the six months to September 30th were down 17% on the same period last year, to £64.7m. Profits for the full year, meanwhile, were expected to be ‘significantly below current expectations’.
Shares had dropped more than 10% to 670p in lunchtime trading on the news, having already lost a third of their value over the last twelve months. Mulberry downplayed the poor showing (surprise surprise) by saying the ‘first half was expected to be particularly difficult’, referring to the aftermath of Bruno Guillon’s disastrous tenure as boss, which came to an end in March.
Guillon took the company away from its traditional, mid-priced British base to pursue a high-end, international market, contributing to a severe decline in its fortunes. Profits were £26m when Guillon took over in 2012, but this year will reach no more than £4m, according to estimates from Barclays.
Chairman and former chief executive Godfrey Davis returned to the top spot earlier this year and has since attempted to restore Mulberry’s position in the mid-market, notably through a collaboration with model British it-model Cara Delevingne. But this, Davis said, will take time to take effect.
Oddly, while Burberry suffered from dipping Asian demand, Mulberry’s international sales have actually increased by 2% since May, indicating that perhaps the mid price point is the right one for China. It was, however, nowhere near enough to compensate for the 9% drop in UK retail sales, which were ‘adversely affected by a decline in footfall, particularly tourist shoppers’.
By the looks of it then, Chinese consumers are bypassing Burberry in Beijing and Mulberry in Bicester. Whether they or Mulberry’s British shoppers will be swayed by Delevigne’s injection of glamour, of course, remains to be seen.