LONDON (ShareCast) - Luxury handbag maker Mulberry said the first half of the year has been tougher than anticipated as it delivered a big profit warning to investors.
The company said despite sales trends having improved as the first half progressed, revenues for the six months to 30 September were down 17% on last year at £64.7m.

As such, pre-tax profit for the full year ending March 2015 "is expected to be significantly below current expectations".

The comments sent the stock down as much as 25% in early deals.

"The first half was expected to be particularly difficult, with it taking some time for the measures implemented after the April management change to take effect," the company said.

"Actual trading conditions have been more difficult than expected, in part due to the continuing headwinds affecting the luxury sector."

Retail sales were 9% lower at £45.1m in the first half as growth overseas was offset by a decline in the UK as full-price sales were hit by lower footfall, particularly tourist shoppers.

Meanwhile, wholesale sales dropped 31% to £19.6m due to a combination of inventory reduction and conservative ordering by Asian and European franchise partners.

Executive chairman Godfrey Davis said that the first half was difficult as expected but Mulberry still "remains profitable and cash generative, giving us the resources to invest for the future".

He said: "Despite the current challenges, I remain confident that we will build on Mulberry's solid foundations and unique brand positioning in the luxury market to restore growth in the medium term."

By 09:15, the stock was down 16.7% at 625p, having earlier fallen to a low of 565.5p.

Analyst John Cummins from WH Ireland said that he would be cutting full-year pre-tax profit forecasts from £11.2m to just £3.5m in light of Tuesday's update, compared with £14m earned the year before.

"Whilst the immaturity of Mulberry's presence outside of the UK provides significant potential growth, it will clearly take time for the group's fortunes' to improve," he said.

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