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Dec 6, 2012
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Mulberry sees improvements after first-half profit fall

By
Reuters
Published
Dec 6, 2012

LONDON - British luxury fashion group Mulberry said the second half of the year looked encouraging with retail sales on the rise after first half profits tumbled 36 percent due to changes to its wholesale business.

The handbag and leather goods maker, which in October warned on profit due to slowing demand in Asia and a decision to slash its wholesale network, on Thursday said pretax profit for the six months to September 30 was 10 million pounds ($16 million).


Mulberry Autmn-Winter 2012/2013 (photo: Mulberry)

That compared with 15.6 million posted a year ago.

Mulberry, which sells Bayswater handbags for 1,400 pounds, said like-for-like retail sales were up 11 percent in the nine weeks to December 1 and that it expected to meet current full-year market forecasts.

The group, which expects changes to its wholesale operations to result in a 10 percent decline in full-year revenue for the unit, said it was committed to overseas expansion, targeting 15 to 20 operated and partnered store openings per year.

The firm's move to limit the amount of stock heading to lower quality wholesale accounts is part of a push to boost the value of Mulberry's brands. In retail it will also focus on making products for full-price stores over discounted outlets.

However, those decisions have coincided with a slowdown in wholesale demand and international sales, forcing the firm to warn annual profit would be below the 36 million pounds made in 2011-12. The average forecast for 2012/13 pretax profit is 29.56 million pounds, according to a Reuters poll of 4 analysts.

Last month fashion rival Burberry said it was in strong shape heading into Christmas as wealthier shoppers spend on its top-end ranges, helping ease the pain of a slowdown in China where demand for luxury goods had boomed.

Shares in Mulberry, which have shed 42 percent on six months ago, closed at 1155 pence on Wednesday, valuing the business at around 683 million pounds.

($1 = 0.6214 British pounds)

Reporting by Neil Maidment

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