Luxury brand Mulberry Group Plc. (MUL.L) Tuesday predicted lower profit for the full year, compared to last year, as revenues are estimated to be below market expectations due to a decline in wholesale revenue in the first half of the year. The shares plunged nearly 28 percent.
The bag maker said revenue in the first half of the year rose 6 percent to $76.5 million with a 13 percent growth in Retail revenue while Wholesale shipments to third parties fell 4 percent.
Retail revenue in the period totaled 46.5 million pounds. UK retail sales climbed 10 percent and UK full price sales performed in line with expectations.
However, UK off-price sales were weaker, reflecting a decision not to make product specifically for the off-price business. International retail sales climbed 41 percent, but did not meet expectations.
Wholesale shipments fell due to rationalization of some international wholesale accounts to improve the quality of Mulberry's distribution network.
Further, a more challenging environment in Asia led to cautious ordering by franchise partners and comparatives were tougher due to restocking of the wholesale channel last year.
Bruno Guillon, CEO, said, "Mulberry's core UK retail business and key wholesale accounts continue to perform well in the context of a more challenging external environment. Although international retail sales are behind expectations, newly opened stores are performing satisfactorily and we are on track to open our target of 15-20 stores during 2012/13.''
Primarily due to lower wholesale revenue, Mulberry now expects group revenue growth for the year ending March 31, 2013 to be below market expectations. As a result, combined with the investment being made in international retail expansion, Mulberry now expects full year profits to be below last year.
However the business continues to be strongly profitable and generate significant cash to fund its future expansion, the company added.
MUL.L is currently trading at 951.50 pence, down 368.50 pence or 27.92 percent, on 161,048 shares.
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