Mulberry’s had a rough time of it of late. Back in June, the company issued its first warning of a sales slowdown, causing its share price to plummet 22%. Muberry’s market cap has lost a total of 60% of its value since May.
The problem for Mulberry and other luxury retailers is that growth in the powerhouse economies of Japan and China is slowing. Burberry too released a profit warning last month, wiping a billion off its value. The World Bank cut its growth forecasts for the Chinese economy only last week, downgrading it to 7.7% from 8.2%. Japan has also been consistently revising down its growth numbers this year: between April and June 2012, the economy grew 0.7% instead of the 1.4% anticipated.
But the leather hasn’t lost all its sheen in luxury goods. Mulberry said total revenue rose 6% to £76.5m in the six months to 30 September. Retail revenue is also up 13% to £46.5m, which is an increase of 7% on a like-for-like basis. The problem lies within its international wholesale arm, which is down 4% to £30m.
Mulberry insists that given the economic climate it is still ‘strongly profitable’ with enough cash on the books to fund future expansion – it created 300 new jobs only last month. But the markets are yet to be convinced. Investors are betting against in luxury sector in droves today, sending Burberry’s share price down 4%.