Is Mulberry set to finish on a high?

Mulberry is making headway, and the changes to its designs and prices are proving popular with customers. 

A Mulberry sign
Source: Bloomberg

Mulberry will announce its first-half figures on 10 December, and traders are expecting revenue of £75.1 million, compared with last year’s second-half revenue of £83.9 million. The firm will announce its full-year results in June 2016, and traders are expecting revenue of £164 million and adjusted net income of £3 million. These forecasts represent a 10.8% rise in revenue and a 136% jump in adjusted net income.

After several profits warnings and changes to senior management Mulberry seems to be on solid ground, and the fashion house is hoping to build on that strong foundation. In the last financial year the company barley posted a profit, but its prospects are looking up now that the company is moving away from the higher end of the handbag market.

Mulberry’s attempt to break into the top-end of the market backfired and it led to the company issuing a string of profit warnings, which sent the stock tumbling. The company now has over 70% of its products priced at under £1000, compared with 46% in the spring and summer range last year. Not only is the price range changing so are the designs, which have received a warm welcome from its customers.

Mulberry won’t be as quick to open new stores as it once was as online sales are on the rise, and the increase in digit transactions are out stripping in-store sales. The firm will continue to encounter falling sales from the Far East as the Chinese middle class aren’t spending as freely anymore. 

Equity analysts are moderately bullish on Mulberry, and out of the three ratings, all are holds. The average target price is £8.75, which is 4.8% below the current price. Investment banks are more bullish on Burberry, and out of the 27 recommendations, nine are buys, 16 are holds, and two are sells. The average target price is £15.17m which is 22% above the current price.

The share price has been on the rise since October 2014 and £10 will be the initial target and a move through it will bring £11 into play. The stock has been trapped in a tight range through 2015 and moves lower will find support at £8.52 and £8.25. 

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