Mulberry reverts to lower prices after new profit warning

LONDON (Reuters) - Mulberry (LSE:MUL) is to cut prices to return to its more affordable luxury roots after the British brand warned underlying annual profit would be marginally below expectations, its fourth downgrade in two years.

The group, which is still looking for a new chief executive after the departure last month of Bruno Guillon, said while the return to more affordable prices would have a short-term financial impact, it was needed to ensure the future strength of the company.

Under Guillon, 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 taken by surprise by the arrival of aspirational brands at the lower end of the luxury range, such as Michael Kors (KORS.N).

Mulberry, which makes Bayswater and Alexa handbags that sell for up to 4,500 pounds, issued a significant profit warning in January after heavy discounting over Christmas in Britain and weak demand in South Korea hit sales.

On Thursday it said profit before tax for the year ended 31 March 2014 was now expected to be around 14 million pounds ($23.5 million). The group delivered profit of 26 million pounds last year and according to Reuters data analysts had been expecting profits of around 19 million pounds this year.

"Following the recent change in management, we are focussing on achieving sales growth through the reinforcement of our product offering at more affordable prices to meet the expectations of our loyal customers," said Godfrey Davis, Interim Executive Chairman.

"This will have short-term financial consequences but is necessary to ensure the future strength of the Mulberry brand." ($1 = 0.5955 British Pounds)

(Reporting by Kate Holton, Editing by Paul Sandle)