Reuters: Hot Stocks: UPDATE 2-Mulberry warning fuels fears of drop in tourist spending

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UPDATE 2-Mulberry warning fuels fears of drop in tourist spending Mar 22nd 2013, 11:35 Fri Mar 22, 2013 7:35am EDT * Mulberry profit warning is second in 6 months * Sees FY profit of 26 mln stg vs f'cst 31.2 mln stg * Bang & Olufsen also cuts revenue outlook * Mulberry shares fall 17 pct; B&O, Burberry down too (Adds detail, analyst comment, ONS tourism data, shares) By James Davey LONDON, March 22 (Reuters) - British handbag maker Mulberry issued a profit warning on Friday, partly blaming a drop in spending by tourists who have been crucial to the luxury industry's ability to cope in a flagging European economy. Danish luxury stereo and television maker Bang & Olufsen also cut its revenue outlook on Friday, adding to jitters in the sector. Shares in Britain's largest luxury brand Burberry, which like Mulberry relies heavily on tourists in its London stores, dropped as much as 5 percent, among the biggest declines by a European blue-chip company. At 1030 GMT, Mulberry shares were down 17 percent and Bang & Olufsen's off 12 percent. Luxury brands have largely coped with an ailing European economy thanks to strong demand from Chinese buyers, both in their home market and when travelling abroad, although there have been periodic signs of weakness in recent months. Mulberry, which sells Bayswater handbags for around 1,400 pounds ($2,100) and mint green cotton tweed coats for 1,750 pounds, also issued a profit warning in October, blaming a slowdown in Asian demand. The group said on Friday pretax profit for the year ending March 31 was likely to drop 28 percent to 26 million pounds, on revenue of 165 million pounds. That compared with analyst forecasts for pretax profit of 31.2 million pounds and revenue of 177.4 million, according to Reuters data. Mulberry said retail sales over the Christmas period were generally in line with expectations but deteriorated over the last 10 weeks, including a drop in tourist spending at London stores. The firm trades from 11 stores in the capital as well as five outlets at airport terminals, and had been enjoying robust demand from visitors from Russia and Nigeria, as well as Asia. Burberry, which has six London stores, declined to comment. According to Britain's Office for National Statistics, visits to the country by overseas residents fell by 1 percent in January, following two strong months in November and December. CUTTING FORECASTS Other luxury brands have also seen a slowdown in London trade as a result of fewer tourists. "It's (shopper numbers) about 30 percent less than last year, some days 60 percent," said Paulina Rajnert, an administrative manager at Miu Miu's New Bond Street store, noting most of the reduction was due to fewer tourists. Mulberry has recently been subject to takeover speculation. Earlier this month French luxury group Hermes denied a press report that is was mulling a bid. Mulberry said retail like-for-like growth for the year was likely to be about 6 percent, while wholesale sales were expected to be down 15 percent. The wholesale drop reflected a previously flagged move to limit the amount of stock going into lower quality wholesale accounts with the aim of growing the Mulberry brand's value in the longer term, as well as lower than expected in-season ordering. The firm said the order book for autumn/winter 2013 was, however, building satisfactorily. Analysts at Barclays cut their profit forecast for 2012-13 to the company guidance and their forecast for 2013-14 to 30 million pounds from 39.8 million. Separately on Friday, French group PPR unveiled plans to rename itself "Kering" as part of its transformation from a retail conglomerate to a luxury and sporting goods group. ($1 = 0.6588 British pounds) (additional reporting by Clare Hutchison; Editing by Mark Potter) Link this Share this Digg this Email Reprints

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