English luxury brand Mulberry (MUL:AIM) is clobbered by investors after posting its third profits warning in not much more than a year. Shares in the high-end bags maker and retailer are marked down 38.75p (5.5%) to 670.75p early on, as analysts take red pens to forecasts again.
Bath-based Mulberry, one of Aim's long-serving constituents, is suffering from growing pains as it transforms itself from a domestic to a global luxury brand. In its latest trading update, the £420 million cap warns taxable profits for the year to March just-ended will be 'marginally' below expectations. Barclays Capital, whose estimates may have been towards to top-end of the consensus, had £19 million forecast, although the broker has since cut its estimates to £14 million, yet Barclays Capital had previously slashed its pre-tax profit estimate from £27 million in the wake of January's profits alert.
Sales should meet market expectations, although it remains unclear as to what the company believes that to be. Mulberry has also decided to write down the value of two US stores, creating a non-cash charge of £2.7 million and will also absorb the cost of CEO Bruno Guillon's departure package following his resignation last month.
Former boss Godfrey Davis, appointed as interim executive chairman three weeks ago, also warns March 2015 profits will be severely curtailed by a new strategy that will involve extending he range away from the upmarket end and towards cheaper, more affordable, new products. Davis hopes this will reinvigorate sales and re-engage with UK shoppers, although it remains unclear what this might mean for future profit margins. The rate of overseas store openings will also be slowed as Mulberry works on improving the profitability of recent openings.
An understandably miffed Barclays Capital has savagely attacked its March 2015 profits estimate as well, slashing expectations for the current 12 months a whopping 42%, from £19 million to £11 million. The broker had been predicting pre-tax profits as high as £30 million in January.
The latest stumble from Mulberry, still looking for a creative director after losing Emma Hill last year, comes a matter of months after it warned profits would be 'substantially' below expectations. Then, it blamed sluggish UK sales and wholesale order cancellations from Korea over the 17 weeks to 25 January.
This period included the vital pre-Christmas sales season during which Mulberry's punchy sales prices were at odds with a highly-promotional UK retail market. A further factor behind the earnings alert was the committed costs of store openings undertaken over the previous two years.