How Mulberry Has Fared During 2012

Published in Company Comment on 3 December 2012

Mulberry (LSE: MUL) has issued a series of disappointing statements this year.

Mulberry Group (LSE: MUL) has plummeted 24% to around 1,120p so far during 2012, making the share one of this year's more volatile performers in the FTSE 100 (UKX). During the same time, the blue-chip index has gained about 5%.

The British luxury leather goods and accessories maker has had a tough year dealing with the global slowdown in consumer spending and its impact on sales.

In March, Bruno Guillon was appointed new chief executive of the company. He succeeded Godfrey Davis who continues as non-executive chairman.

Then in June, the group issued a solid set of preliminary results for year ending 31 March 2012. It saw pre-tax profits increase by 54% from £23.3m in 2011 to £36m this year. Total revenues climbed 38% from £121.6m last year to £168.5m, and International sales were 61% up on the previous year at £65.2 million. Gross margin increased to 66.2% -- up from 65.4% in 2011 -- and the balance sheet was strong with cash of £27.3 million and no debt.

At the time, Davis said the company had performed well against expectations: 

“While the current economic conditions make the short term trading outlook more challenging in some markets, we remain confident about Mulberry's long term future. We continue to focus on developing our business internationally, opening new stores and building the foundations for long term growth.”

However in October, Mulberry issued a severe profits warning. It reported lower than expected International retail sales -- up 41% and wholesale shipments were down 4% for the first half of the year. The news sent the shares tumbling by more than 25% in just one day.

Bruno Guillon, chief executive officer, commented: 

"Mulberry's core UK 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.

The Mulberry brand continues to gain recognition globally and we remain very confident in the outlook for the business. We continue to focus on creativity, craftsmanship and quality and in this context will start the construction of our second UK factory within the next few weeks."

Mulberry is on a P/E of 24, and it pays an annual dividend of 5p per share on a yield of 0.5%. It’s probably one to watch for investors who are chasing capital growth rather than income, if it can ride through these turbulent times.

Interim results for the six months ended 30 September 2012 are expected on Thursday 6 December 2012.

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> Sonia does not own shares in Mulberry.

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