Mulberry Group Plc share price down, plans to launch “affordable” luxury goods, cuts profit forecast

After the recent departure of its Chief Executive Officer Bruno Guillon, the British luxury-goods brand Mulberry Group Plc said that it plans to focus on the “affordable” luxury category by reducing its new products prices and offer cheaper handbags in order to increase its sales.

Godfrey Davis, who is the Interim Executive Chairman of the company, said in a statement, which was cited by the Wall Street Journal: “Following the recent change in management, we are focusing on achieving sales growth through the reinforcement of our product offering at more affordable prices to meet the expectations of our loyal customers. This will have short term financial consequences but is necessary to ensure the future strength of the Mulberry brand.”

As reported by the Financial Times, Mr. Davis also explained the companys new strategy, saying: “Our traditional customers have found our products unaffordable, or not exactly to their taste.”

Mulberry Group Plc made an official statement, revealing that its underlying pretax profit for the last financial year, which ended March 31st is expected to be lower than the initial analysts estimates. The company shared that these results are due to the expenses associated with the CEOs departure last month. The 2013 results are scheduled to be officially revealed on June 12th 2014.

The former Chief Executive Officer put his efforts into expanding the companys reach by opening expensive new flagship stores. This strategy, however, proved to not be successful enough, especially after the company faced the fierce rivalry of some new handbag designers. In addition, the opening of the companys new flagship stores affected Mulberrys profit.

Mulberry Gorup Plc said in its statement, which was cited by Bloomberg: “As a consequence of these factors, in particular the pricing strategy, there will be a material adverse impact on profit whilst brand momentum rebuilds.”

Ex Chief Executive Officer Mr. Guillon left the company after Mulberry Group Plc lost about two-thirds of its market value for a couple of years. Now Mr. Godfrey Davis, who was appointed as an interim successor to Mr. Guillon is trying to increase the companys sales by launching new products that are intended to be more affordable.

Mulberry Group PLC fell by 1.13% on Thursday in London to close the session at 701.50 pence, marking a one-year change of -25.77%. The luxury bag maker is valued at 420.88 million pounds. According to the Financial Times, the 3 analysts offering 12 month price targets for Mulberry Group Plc have a median target of 760.00 pence, with a high estimate of 800.00 pence and a low estimate of 600.00 pence. The median estimate represents an 8.34% increase from the last price of GBX 701.50.