Jan. 15 (Bloomberg) -- Burberry Group Plc, the maker of $3,100 metal-studded Knight handbags, fell 12 percent in London trading, the most ever, after the company said it may miss profit estimates.

Meeting analysts' estimates for full-year earnings before interest and taxes of 210 million pounds ($411 million) ``looks a bit of a stretch,'' Chief Financial Officer Stacey Cartwright said on a conference call today. Third-quarter sales in the period rose 23 percent to 254 million pounds, the company said.

Cartwright said retail sales were ``slightly'' under plan after the company was slow with deliveries. Burberry, which features Sting's daughter Coco in its current advertising campaign, will spend more than it planned in the second half on warehousing and distribution. The label is investing in logistics and is adding higher-priced bags to stoke sales.

``It's a tough market, and if you miss on expectations you will get punished,'' said John Guy, an analyst with MF Global Securities in London. ``It didn't help that they had some self- inflicted wounds with glitches on replenishments and misallocation of some stock.''

Burberry fell 56.5 pence to 430 at 10:31 a.m. in London. It's the steepest percentage decline since the company was spun off from GUS Plc in 2002. The shares have lost about 32 percent in the past year, compared with the 12 percent drop in the Bloomberg European Fashion Index.

Luxury stocks have dropped worldwide over the past two months amid signs that U.S. consumer spending will have an earlier, steeper decline than analysts had anticipated. The 13- Member Bloomberg European Fashion Index has lost 15 percent since Nov. 15. Tiffany & Co., the world's second-largest jewelry retailer, cut its profit forecast last week.

Merrill Downgrade

``We had some glitches in our European business because we didn't get product in the stores in as timely manner a as we would have liked,'' Burberry's Cartwright said on the call.

Profitability ``should now come in at the low end of consensus in the second half,'' wrote Antoine Colonna, an analyst with Merrill Lynch, in a note to clients after the report. He cut Burberry to ``neutral'' and lowered earnings-per- share estimates by 7 percent for March 2008 and March 2009.

Retail sales rose 12 percent to 161 million pounds, while wholesale sales, or sales to department stores and other third- party distributors, gained 71 percent to 74 million pounds.

The shares fell even as third-quarter sales beat the 239 million-pound average of four analysts' estimates compiled by Bloomberg and the company raised its forecast for wholesale sales in the second half.

The luxury-goods maker now expects wholesale sales growth in the second half to be 20 percent, up from the previous ``mid- teens'' forecast, after improving deliveries. Wholesaling generates about 30 percent of total revenue, while 63 percent comes from retailing and the rest from licensing the Burberry name for use on goods such as eyeglasses.

Burberry opened six stores in the quarter, including outlets in Hong Kong and Florence, Italy.

To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net

Last Updated: January 15, 2008 06:03 EST