Mulberry, the luxury British handbag maker, has warned that its full-year profits will "substantially" miss expectations after a tumble in U.K. sales over the Christmas period.

The news sent shares of the company down 22 percent on Wednesday.

Mulberry said retail sales over Christmas were down 7 percent as it lost out to discounting from rivals. It said profits this year are also hit by wholesale order cancellations in South Korea, its largest Asian market.

Mulberry, one of Britain's best-known exports, has already suffered two years of falling profits with tougher trading conditions in Asia and the domestic market.

It is still searching for a replacement for creative director Emma Hill, who has been credited with turning the company into an internationally recognized brand. Hill left last year.