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Burberry & Mulberry's market raspberry

Tuesday, October 14, 2014 - 01:49

Shares in British retailers Mulberry and Burberry have taken a hit. The handbag maker's stock fell 25% while Asia-focussed Burberry saw a 6% slide. Sonia Legg looks at the reasons why.

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It's the season for raincoats in the UK and the forecast isn't looking good for one of its best exporters. Burberry posted a 14% rise in first half revenue - making £1.1 billion in the six months to September 30th. But shares in the British luxury retailer fell 6% on a warning of grey clouds ahead. Michael Hewson is from CMC Markets (SOUNDBITE) (English): MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS, SAYING: "The new CEO has revised down the outlook for the next six months and I think it is not hard to see why. If you look at the problems in Europe - sluggish retail sales there, sluggish retail sales in China. If you look at what China's retail sales were doing two years ago they were up in the mid teens now they are around 10 - 11%. You look at Japan it's showing signs of slowing down as well." Christopher Bailey only took over as CEO in May. With the Ukraine crisis and slowdowns in key Asian markets it hasn't been the easiest few months. (SOUNDBITE) (English): MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS, SAYING: "I think he is being circumspect in his outlook - he is playing down expectations and I don't think the market has taken kindly to that given the concerns about stock valuations across the board, particularly in the luxury sector." Burberry still sees mid-single figure growth for the next six months. And it's also benefitting from current exchange rates. Things aren't looking so good for luxury British handbag maker Mulberry. Its shares dropped 25% after it cut its profit forecast for the third time this year. It makes 60% of its sales in the UK and partly blames a fall in tourist shoppers. But a shift to lower price bags didn't help - revenues for the six months to September 30 were down 17% with wholesale sales down 31% Mulberry, like bigger rivals Louis Vuitton and Gucci, are continuing to lose out to cheaper fashion brands like Michael Kors.

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Burberry & Mulberry's market raspberry

Tuesday, October 14, 2014 - 01:49