Where next for Mulberry's share price? – Fidelity International

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Published 22 June 2022
Fidelity International

Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.
MULBERRY, the British luxury handbag brand, has said it expects the “robust sales trend” delivered in the first half to have continued throughout the second half, and if that has happened, it should mean that group revenue for the full year is “moderately ahead” of current expectations.
This will no doubt please investors who have seen their shares in AIM-quoted Mulberry Group (MUL) struggle to make headway for the past few years. The big question now is whether shares in the luxury goods group are good value? We should get a better idea of whether or not that is the case when Mulberry posts its full-year results on 29 June.
Mulberry has certainly appeared to have been doing everything right on the corporate front, yet its share price performance has disappointed. Over the past five years Mulberry has gone from a loss-making company into a profitable one, yet its share price has failed to keep track.
In November, Mulberry reported that first half revenues had risen by 34% year-on-year to £65.7 million. Meanwhile, pre-tax profits came in at £10.2 million compared to a loss of £2.4 million a year earlier. Over that same period, Mulberry’s share price has dipped from as high as 335p to 190p. Today they’re back up around the 295p mark.
At next week’s full-year results announcement, long-suffering shareholders should hear that despite increased marketing spend in the second-half of the year, as Mulberry ploughed cash into building global brand awareness, its cash position is also still looking strong. Net cash balances at the full-year stage are expected to be in excess of £20 million. Gross margins have also been maintained.
Of course, in the face of the pandemic and now in the midst of the cost of living crisis, there has been plenty for investors to be cautious about, and that is likely to remain the case for some time to come, so this could explain the disappointing share price performance.
However, those in the luxury handbag sector clearly don’t see any of that taking too much of the shine off this lucrative market. According to a report by Allied Market Research, the global market for luxury bags is expected to be worth a staggering $89.9 billion by 2026.
Mulberry has global brand awareness mapped out and a focus on sustainability in mind. It has recently launched its first ever carbon neutral bag. Long-suffering shareholders will no doubt hope that the latest set of full-year results give something of a luxe factor to Mulberry’s shares.
Five year performance
Past performance is not a reliable indicator of future returns
Source: FE from 21.6.17 to 216.22 Basis: Total returns in GBP. Excludes initial charge.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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