Mulberry handbagged by 230m slump: Luxury fashion brand sees huge sum wiped off its value after disappointing sales
More than 230million was wiped off the iconic British company's value yesterday as its share price fell by 25 per centSales overseas, particularly in the Far East, are running below expectationsMulberry is most famous for its handbags, regularly spotted on the arms of stylish celebrities from Kate Moss to Alexa Chung
00:30 GMT, 24 October 2012
Celebrity fan: British style icon Alexa Chung toting Mulberry's 'Alexa' handbag, which she inspired
Mulberry, the luxury British fashion brand whose handbags are seen on the arms of the world’s most famous women, has suffered a share price slump.
More than 230million was wiped off the company’s value yesterday as its share price fell by 25per cent plus in early trading.
The business’s stock market value is down by around half over the last six months in what amounts to a remarkable reverse for what has been a British success story.
The latest fall came after the iconic name revealed that sales overseas, particularly in the Far East, are running below expectations with the result that profits will fall from the 36million made in 2011.
The company, along with Burberry, has been riding a wave of success in recent years which suggested it was impervious to the global economic crisis.
However, all luxury brands are coming under pressure as even China fails to deliver the economic growth that has created a burgeoning middle class hungry for designer labels.
The luxury brand has benefited from its association with fashion icon Alexa Chung and more recently, American singer song-writer Lana Del Ray.
The Alexa bag, has become a must-have modern classic with the standard version selling out from Beijing to New York despite a price tag of 785, while an Oak Ostrich version was listed at 3,750.
The company also achieved success with the 795 over-sized Del Ray bag, which was launched in May, while the brand’s celebrity fans range from Sienna Miller to Jennifer Lawrence.
Issuing a warning to investors, the company said: ‘Mulberry now expects group revenue growth for the year to March 31 2013 to be below market expectations.
‘As a result of this, combined with the previously highlighted investment being made in international retail expansion, we now expect full year profits to be below last year.’
City analysts said the share price fall yesterday was the biggest one-day reverse in terms of its stock market value in 14 years.
Mulberry’s shares peaked at 25 in the summer but one leading analyst has now set a target price of around 11.
Celeb favourite: Mulberry handbags, including the Alexa (left), named after British fashionista Alexa Chung, and the Del Rey (right), inspired by U.S. singer Lana Del Rey, regularly adorn the arms of celebrities
The company is one of the few British fashion names to still make its products in this country and it plans to open a second factory in Somerset which will double its output.
Its designs remain popular with the result that its total retail sales are up 13per cent to 46.5 million for the six months to the end of September – including a 10per cent rise in the UK.
However, these positives have been overwhelmed by lower-than-expected international sales with a four per cent decline in its wholesale shipments to foreign fashion retailers.
Stars including Downton Abbey's Joanne Froggatt (second left) and Elizabeth McGovern (centre), and socialite Olivia Palermo on the front row at the Mulberry show at London Fashion Week
Shock: The profits warning from Mulberry suggests the bubble in the luxury goods market has burst
The group was founded by Roger Saul and his mother Joan in Somerset in 1971 and has grown to become an international brand, trading on its British heritage.
Earlier this year it launched the Brilliant Britain campaign and website to celebrate all that is good about this country from architecture, fashion and music to design and science.
The profit warning is a blow to chief executive Bruno Guillon, who only joined the company from luxury brand Hermes in March.
Burberry recently rattled the City after reporting a slowdown in demand in China, although it offered a more reassuring update earlier this month.
The fall-out from the Mulberry problems saw shares in Burberry marked down by four per cent in early trading.
Philip Dorgan, retail analyst at Panmure Gordon stockbrokers, was optimistic that Mulberry would recover quickly from the current reverse.
He said the profit warning was ‘severe’, but added that it was likely the international slowdown which caused its problems was ‘just a blip’.