Mulberry Group Plc, a British luxury-handbag maker, fell the most since 1998 in London trading after profit missed estimates for the first time in four years and sales growth slowed in the last 10 weeks.
The stock, whose value has increased by more than 30 times in the past three years, slid as much as 25 percent to 1,505 pence. The drop cut Mulberry’s market value by 303 million pounds ($470 million) to 897 million pounds.
Although pretax profit of 36 million pounds in the 12 months through March 31 was up 54 percent from a year earlier, earnings missed the 37.4 million-pound average estimate of four analysts compiled by Bloomberg. Mulberry shares have surged since 2008 as the company has consistently beaten estimates, increasing earnings more than eightfold in that time.
Investor appetite for the next luxury growth story has stretched Mulberry’s valuation, according to Luca Solca, global head of European equities at CA Cheuvreux. The shares trade at a multiple of about 35 times earnings, compared with 19 times for LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest luxury-goods company, and 14 times for PPR SA, the owner of Gucci.
“Typically, high-valuation multiples are liable to be punctured by results that are just ’in line’ with expectations, let alone when there is a miss,” Solca said by e-mail.
Mulberry said it remains “cautious” on the outlook because of the “adverse macro-economic climate.” Retail sales growth slowed to 12 percent in the 10 weeks since the end of March from 36 percent in the last fiscal year, the company said.
“Current trading is slightly disappointing,” Amisha Chohan, an analyst at Merchant Securities in London, said in a note. Still, “long-term growth opportunities remain solid.” Chohan has a hold recommendation on the shares.
Revenue in the most recent period was weakest in April, hurt by a decline in sales at outlet centers. Sales at full-price have improved in the U.K. over the last six weeks, growing 21 percent on a like-for-like basis, Mulberry said.
The shares traded down 23 percent at 1,555 pence as of 10:30 a.m. in London. A close at the day’s lowest price would represent the steepest decline since March 3, 1998.
Mulberry said it plans to accelerate its opening program, adding as many as 20 stores internationally this fiscal year. Last year, the company opened 14 outlets in the U.K., the Netherlands, U.S., Korea, Singapore, Thailand and Taiwan.
Shareholders will receive a dividend of 5 pence a share, up 25 percent on the prior year’s 4 pence distribution.