Mulberry Group, the luxury British fashion brand, has warned its full year financial performance will likely fall short of market expectations and below its achievements in 2007 on the back of slowing consumer demand. The share price of the retailer fell this morning on the back of its news, dropping more than 5.50% as of 1pm.
Sales at the group, which specialises in the design, manufacture and sale of leather goods and accessories, increased 29% in the six months to 30 September, with pre-tax profits up 6% to £1.33m. The group reported UK retail sales rose 5% on a like-for-like basis over the six month period. However, more recently the picture has changed and UK retail sales fell 12% on a like-for-like in the 10 weeks to 6 December.
Godfrey Davis, chairman and chief executive at Mulberry, said: “The slowdown in consumer demand experienced during the last weeks of September 2008 has continued. It is clear that the economic climate is having an adverse impact on the buying behaviour of our customers. The most immediate effect of this has been seen within our UK retail business.”
Christmas trading is an important contributor to turnover and profit as are the January sales and Davis noted: “with forecasters continuing to project a global downturn, the outcome for the year will necessarily be impacted by trading in the weeks ahead.”
Davis added that while trading has slowed, its confirmed third party order book for spring/summer 2009 is some 15% ahead of the same time last year.
Over the six month trading period Mulberry reported its gross profit margins saw to 57.7% compared to 57.4% in 2007 despite the fact that net operating expenses for the period increased. During the first half of the year Mulberry said its saw significant increase in raw material costs, although more recently this trend has reversed. However, with weakness in sterling, the group believes margins will continue to see pressure.
