Mulberry is making up for lost time

The fashion house will reveal its full-year figures on Thursday 11 June, and its new strategy will help it hit its full-year target.

Source: Bloomberg

The clothes company’s share price has had a tough time over the past few years, but now the stock has seen some stability over the past few months. Its new strategy of cutting costs and producing a line of more affordable products will help the firm make up for lost time.

As I previously stated, Mulberry’s share price has taken a beating over the years as the company issued a series of profit warnings, but the stock has now stabilised and investor confidence is growing. Thierry Andretta took over as CEO in March, which has allowed previous CEO Godfrey Davis to focus on his role as chairman. Mulberry has had a number of CEOs in the last couple of years and this was a source of investor concern.

In the third-quarter trading update, the company stated it is on track to achieve its end of year target. Mulberry has previously let its pride get the better of itself when it came to pricing its handbags. However, the company is now offering a range of bags between £500 and £1000, and this has helped trading from December onwards. The brand is still associated with high-end luxury products, and if it can maintain that image while drawing in customers, and keeping costs in check, this could be the beginning of a turnaround for the company.

When Mulberry announces its year-end numbers, the market is expecting revenue of £147 million and adjusted net income of £6.88 million. These forecasts represent a 9.8% drop in revenue and a 42% drop in adjusted net income. The company will report its second-half numbers in the same report, and dealers are anticipating revenue of £83.5 million, and this compares with the first-half revenue of £64.7 million.

Investment banks are a touch on the bearish side when it comes to Mulberry, and out of the four recommendations, three are holds, and one is a sell. The average target price is £7.94, which is 14% above the current price. Equity analysts are very bullish on Burberry, and out of the 29 ratings, ten are buys, 16 are holds, and three are sells. The average target price is £18.73, which is 9.5% above the current price.

Mulberry’s share price has been rising steadily since February 2014, and £8.80 is providing support and the year-to-date high of £9.47 is the target. A move though it would put £10 in sight – a level not seen since December 2013. If £8.80 is punctured the next level of support will be £8.25.

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