Mulberry’s decision to position itself like one of the super desirable – and very expensive – luxury brands by hiking its prices has brought the British handbag brand crashing back to reality with the company issuing its second profits warning since Christmas.

Mulberry’s decision to position itself like one of the super desirable – and very expensive – luxury brands by hiking its prices has brought the British handbag brand crashing back to reality with the company issuing its second profits warning since Christmas.

Mulberry, famed for its line-up of bestselling bags such as the Alexa (named after presenter Alexa Chung), said profits for the year to March 31 would be about £14m, falling below analyst expectations of £19m.

Under the tenure of chief executive Bruno Guillon, the former managing director of Hermès who was brought in two years ago, Mulberry’s prices have crept up, with handbags selling for up to an eye-watering £5,000. Mulberry punched above its weight, positioning itself as an exclusive designer brand targeted at rich shoppers from China and the Middle East. But, in doing so, Mulberry lost touch with its core customers who were priced out and instead snapped up other premium brands with more affordable price tags.

The strategy was clearly the wrong move for Mulberry and Godfrey Davis, interim executive chairman of Mulberry, said last week that the company plans to revert back to offering more reasonable prices.

“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,” he said last week.

As a result, the British brand will introduce a range of bags retailing between £495 and £695 in June.

Its margin will be squeezed but its quality won’t, Davis insisted.

The profit warning and reversal in its pricing architecture comes at a time when Mulberry is still without a creative director following the departure of creative designer Emma Hill in June. Hill was instrumental in making Mulberry the major global brand it is today and her departure was viewed as a blow to the fashion brand.

But by returning to its roots, Mulberry might just become the ‘IT’ bag brand for British female shoppers once again.

Suzanne Bearne is a freelance journalist specialising in fashion, retail and travel. She can be found tweeting at @sbearne