LONDON -- The shares of Mulberry (LSE: MUL.L) crashed 28% to 950 pence in early London trade this morning after the luxury handbag designer issued a profit warning.

The AIM-quoted group said lower wholesale revenue during the first half would mean that sales growth for the full year would now be less than previously forecast. And alongside additional costs relating to the group's international expansion, current-year profits are now expected to come in below those of last year.

Today's statement confirmed that Mulberry's first-half sales had actually improved 6% to 77 million pounds, with U.K. retail turnover up 10% and wholesale revenue down 4%. A reduction to the number of wholesale accounts plus "a more challenging external environment in Asia" were cited as reasons for the earnings shortfall.

Mulberry's last annual figures showed profits up 54% to 36 million pounds. Prior to today, City brokers had expected current-year profits of 41 million pounds.

Bruno Guillon, Mulberry's chief executive, said:

Mulberry's core U.K. retail business and key wholesale accounts continue to perform well in the context of a more challenging external environment. Although international retail sales are behind expectations, newly opened stores are performing satisfactorily and we are on track to open our target of 15-20 stores during 2012/13.

The steps we have taken to improve the quality of Mulberry's distribution network in both the retail and wholesale channels will result in the short-term slowing of sales growth. However, we firmly believe these steps are in the long-term interests of building Mulberry into a global luxury brand.

This morning's news from Mulberry echoes a recent update from fellow luxury fashion firm Burberry, which saw its shares dive 17% one day in September after issuing a profit alert.

For prospective knife-catchers, it's worth bearing in mind that Mulberry has recovered from previous setbacks before. During fiscal year 2009, the group reported profits falling from 5 million pounds to 4 million pounds, and the shares collapsed from 191 pence to 60 pence -- but then went on to grow 41-fold within three years as the business recovered strongly. Such potential returns suggest it may pay to keep an eye on Mulberry.

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