Mulberry World’s Top Fashion Stock as Overseas Sales Boom
Mulberry Group Plc (MUL), the 40-year-old British luxury-handbag maker, is the world’s best-performing fashion retail stock over the past year and its sales may keep gaining, driven by overseas growth, analysts say.
The stock has risen 526 percent to 1,756 pence in the past 12 months, making it best performer in the apparel retailers segment, according to Bloomberg data. Among all retailers, it’s behind only PT Mitra Adiperkasa, an Indonesian company that runs Starbucks Corp. coffee shops and Sogo department stores in the country, which has risen 641 percent over the period.
Investors are betting Mulberry, whose handbags include the Alexa, named after British model and television hostess Alexa Chung, and its Bayswater bag, available in a “bright-cabbage sparkle tweed” at 775 pounds ($1,250), will join the likes of Burberry Group Plc (BRBY) as an iconic luxury brand.
“Growth is very hard to come by, particularly in western Europe, but there are still some companies growing incredibly fast,” said Harry Nimmo, manager of the 1 billion-pound U.K. Smaller Companies Fund at Standard Life Investments.
Nimmo’s funds are the third-largest holder of Mulberry stock and own 7.2 percent of Asos Plc (ASC), a U.K. Internet clothing retailer. Asos is western Europe’s second-biggest gainer among clothing retailers above a market value of $10 million over the past year, Bloomberg data show.
Mulberry’s shares have gained 24-fold over the past two years, making it the top gainer over the period in the FTSE AIM All-Share index of 805 British stocks. In the year ended June 30, it was the second biggest gainer on the 1,526-member Russell GLO Consumer Discretionary index, behind only Jinchuan Group Co., a Chinese nickel producer that also sells cosmetics.
Still, at a price-to-earnings ratio of 59 times, compared with 55 times for Hermes International (RMS) SA, the French maker of Birkin handbags, the stock is approaching “full valuation” said David Stoddart, an analyst at Finncap Ltd. in London.
“I’m not at all worried about the company, but when you get beyond this, you are betting on the scale of upgrades,” said Stoddart, who has a “buy” recommendation on the shares. Mulberry raised its profit forecasts four times between last October and March.
Mulberry also has the potential to broaden its brand to products such as eyeglasses and perfume, and it has a relatively limited presence in Asia and the U.S. compared with rivals, Stoddart said.
Extending the brand name is a “classic strategy,” which Mulberry has considered, said Chairman and Chief Executive Officer Godfrey Davis in a telephone interview last week. The management wants to wait until Mulberry has sufficient presence worldwide, and it’s “approaching that critical mass,” he said.
The company is keen to keep its English identity and is adding 50 staff to its factory at Chilcompton, England, to keep the number of bags made in Britain at 30 percent, Davis said.
Mulberry posted a 42 percent increase in retail sales at stores open at least a year for the 10 weeks to June 4, the company said last month. At Burberry, which makes a 14,000-pound suede alligator bowling bag, comparable revenue in the quarter ended June 30 rose 15 percent.
Overseas revenue for Mulberry, more than doubled to 40.5 million pounds for the year ended March 31. At Hermes in 2010, Asian sales rose 19 percent and 24 percent in the Americas.
Salvatore Ferragamo Italia Spa, which opened its first store in Hong Kong in 1986 and in mainland China in 1994, has more than 90 points of sale in greater China, the company said in March. About half are operated directly. Hermes CEO Patrick Thomas said in March that the company will add 13 stores in 2011, including seven in Asia and a second Indian outlet in Mumbai.
In January Mulberry opened its first store in China, in Beijing, the company said last month. New store openings are scheduled for New York, Amsterdam, Germany, Korea, China and Bangkok over the next 10 months, and it’s looking for sites in San Francisco and Los Angeles, the company said.
“It’s still a bigger brand than the business,” Stoddart said. “Some people are looking at it as the next Prada or Ferragamo.”
To contact the editor responsible for this story: Colin Keatinge in London at Ckeatinge@bloomberg.net