29th January 2014
The Mulberry profits warning and steep share price fall has seen brokers review their view of the stock. The Share Centre has downgraded Mulberry to a ‘hold’ as reliance on UK sales impacts profits amid stiff competition and discounting from rivals.
Today Mulberry Chief Executive Bruno Guillon said the group would focus on increasing sales outside the UK.
“The company continues to be cash generative and to invest in the ongoing process of transforming Mulberry from a domestic to a global luxury brand, the progress of which is demonstrated by the continued growth in international retail sales,” he said.
Helal Miah, investment research analyst at The Share Centre, says: “In a trading update this morning, Mulberry warned that pre-tax profit for the year ending March 2014 will be substantially below market expectations, resulting in the shares dropping over 25%.
“Stiff competition and discounting by rivals in the UK during the important holiday period has been the cause, with UK sales falling 3% during the 17 weeks to 25 January. The disappointment of wholesale order cancellations from South Korean customers has also had an impact. Management now expect total sales for the full year to be in line with the previous year.
“The hope for a turnaround in the fortunes of Mulberry had been its international expansion plans, which have actually performed very well, up 40% during the same period. However, starting from a low base, this turnaround has been too slow with the group still heavily reliant on UK sales. We are downgrading our recommendation for investors to a ‘hold’ as our confidence of the group’s transition to a more international business has been dampened.
“We still believe that this will be achieved in the long term, however there is likely to be too many bumps along the way to warrant the risk.”