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RESULTS: Mulberry's shares have taken a heavy tumble after it revealed slowing growth - but the shares are still too expensive
June 14, 2012

Mulberry's shares took a heavy tumble, despite having reported spectacular growth last year, as investors took fright at a sharp slowdown in recent trading. The designer handbag maker said that like-for-like sales in the 10 weeks since the year end had risen just 3 per cent, well below the 26 per cent underlying increase in retail sales it managed in 2012. But its shares are still priced for perfection.

IC TIP: Sell at 1553p

It's almost certainly not the start new chief executive Bruno Guillon was looking for. However, the former Hermes executive still believes Mulberry's long-term prospects are sound, and is committing £7.5m to the construction of a second factory that will double the group's UK production capacity. The new facility is expected to be opened by December and follows the extension to its existing factory completed last year, which added 30 per cent to capacity.

Strong international growth is also prompting the group and its partners to open more overseas stores. Ten new stores were added in Asia Pacific alone last year, which helped lift sales to the region by 70 per cent to £25.1m, and Asia Pacific will form the rump of the additional 15-20 new stores it's planning this year. However, wholesale order growth, which is dominated by international franchisees and independent retailers, has also slowed - third party sales climbed 43 per cent to £68.8m last year, but orders for its Autumn/Winter 2012 collection are up just 11 per cent; a year ago, wholesale orders at this point were up 38 per cent year-on-year.

There is still five months of selling to go, though, and a recent pick-up in UK retail activity is encouraging. Full price sales have recovered in the last six weeks, up 21 per cent on a like-for-like basis. That has been partly driven by the launch of the new Del Rey bag, inspired by US songstress Lana Del Rey, and Mr Guillon is hopeful it can emulate the success of the Alexa bag, which according to Mulberry "added an extra dimension" to sales after its launch in 2010.

Broker Panmure Gordon expects full-year EPS of 55.6p (2012: 43p).

MULBERRY GROUP (MUL)

ORD PRICE:1,553pMARKET VALUE:£ 926m
TOUCH:1,541-1,549p12-MONTH HIGH:2,500pLOW: 1,256p
DIVIDEND YIELD:0.3%PE RATIO:35
NET ASSET VALUE:105pNET CASH:£27.3m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200851.05.206.002.00
200959.04.184.502.00
201072.05.105.202.20
201112223.329.84.00
201216836.043.95.00
% change+38+54+47+25

Ex-div:15 Aug

Payment:17 Sep