By Kate Holton
LONDON (Reuters) - British luxury brand Mulberry
Effectively lowering its outlook for the years ending March 2014 and 2015, Mulberry said its decision to reverse the strategy of higher prices brought in by ousted chief executive Bruno Guillon would have a short-term impact on profit.
Shares in the group, which makes Bayswater and Alexa handbags that sell for up to 4,500 pounds ($7,600), opened down 3.5 percent on Thursday, taking the market value to 409 million pounds.
Guillon, who joined Mulberry in March 2012 and left two years later, had overseen an early rise in the company's stock value to 1.5 billion pounds before three profit warnings in 18 months took their toll.
The company, which is 56 percent owned by Singapore billionaires Christina Ong and Ong Beng Seng, is still searching for Guillon's replacement.
Under the Frenchman, Mulberry hiked prices in an effort to become more exclusive and win back customers who were upgrading to pricier brands. But, like others in the market, it has been surprised by the arrival of aspirational brands at the lower end of the luxury price bracket, such as Michael Kors
These brands, whose bags are priced at a fraction of their more illustrious rivals, are proving increasingly popular, especially with emerging-market customers - the industry's main growth engine.
Mulberry's move upmarket resulted in a profit warning in January, which wiped more than 25 percent off its shares, after heavy discounting over Christmas in Britain and weak demand in South Korea hit sales.
On Thursday it said pre-tax profit for the year ended 31 March 2014 was now expected to be around 14 million pounds ($23.5 million). The group made a profit of 26 million pounds last year and according to Reuters data, analysts had been expecting around 19 million pounds this year.
Analysts at Barclays cut their forecast for 2015 profit before tax by 42 percent to 11 million pounds.
Mulberry said it had decided to cut prices after conducting a review of operations and strategy. As well as lower prices, the company will slow its rate of store openings to five in 2014/15 from eight the year before.
"This will have short-term financial consequences but is necessary to ensure the future strength of the Mulberry brand," said Interim Executive Chairman Godfrey Davis.
(Reporting by Kate Holton, Editing by Erica Billingham)