Mulberry slips on wholesale demand

MulberryHandbag maker Mulberry has signalled more pressure on the luxury goods market after half-year profits slumped 36% amid slowing demand in Asia.

The group, which recently warned over full-year profits due to disappointing international sales, said trading in its wholesale arm had worsened in recent weeks as Asian franchise partners cut orders.

It is also taking a hit from moves to improve the quality of its wholesale distribution network and said sales in the division were now expected to fall by around 10% over the full year, against 4% in the first half.

The wholesale blow and slowing retail sales growth left interim profits at £10 million in the six months to September 30, from £15.6 million a year earlier.

Mulberry, famous for its leather bags, is among a number of firms to raise the alarm over a slowdown in the luxury goods market, with Burberry also recently sparking fears over demand in Asia.

Last year, Mulberry saw half year profits more than treble at the height of the luxury goods bubble. Its shares peaked at 2500p in the summer, but are now less than half that level.

It has been a tough start to Bruno Guillon's tenure as chief executive, who only joined the company from luxury brand Hermes in March. The group's international sales rose 40% to £7.3 million in the first half, and the firm said on warning over profits in October that trading in the division had not met its expectations.

But the firm said retail trading had improved since the first half, with like-for-like sales up 11% in the nine weeks to December 1 against a 7% rise in the first six months. Mulberry said it also hopes that actions to improve its wholesale network will bear fruit in the new year.

Nick Bubb, independent retail analyst, said the half-year results were "weak", but added Mulberry had seen an "encouraging" start to the second half.
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