Luxury fashion house Mulberry could bag a recovery

Luxury fashion house Mulberry’s expensive handbags are loved by celebrities such as Sarah Jessica Parker, Claudia Schiffer, Alexa Chung and the happy-go-lucky Victoria Beckham.

Costing thousands of pounds each, they are a must-have accessory for stars who are forever being chased by the world’s paparazzi.

But the big worry now is that international demand for luxury goods is being affected by escalating economic concerns within the eurozone and the slowing Chinese economy. It is definitely taking its toll on high-ticket discretionary spending.

Rival luxury brands group Burberry (71p higher at 1229p) reported disappointing underlying sales growth of 11 per cent in the first quarter, well below the 34 per cent reported last year.

Mulberry’s shares plummeted 25 per cent to 1505p in one traumatic trading day last month after it reported a weaker-than-expected 3 per cent gain in retail sales for ten weeks to June 9 and management expressed caution about short-term trading conditions. They have remained friendless – that is, until broker Panmure Gordon yesterday stopped the rot.

The stock recovered strongly to 1322p before closing 37p higher at 1287p – still almost 50 per cent lower than the 52-week peak of £25 – after analyst Philip Dorgan reassured investors, leaving his target price at £20.

He said concerns about current trading are unwarranted and the market should remember that Mulberry is only a small global player, with the opportunity to become a large one. Trading remains strong.

Another sector analyst added: ‘Mulberry is just scratching the surface of its global potential. It is under-represented in most of the largest luxury goods markets globally.’

Mulberry’s recent hefty fall has prompted speculation in some quarters that it could be swallowed by one of its peers. Any bidder would have to get the nod from Ong Beng Seng and Christina Ong, the Singaporean billionaires who own 56 per cent of the equity.

Cash ‘n’ carry group Booker, which has been nursed back to health by chief executive Charles Wilson, has had a great year but broker Shore Capital now finds it hard to justify its current premium rating of 18 times earnings. It downgraded to sell from hold and the shares slipped 2.35p to 88.95p.

After fretting for a short while about the slowest Chinese economic growth for three years, the Footsie ended the week with a flourish to close 57.88 points higher at 5,666.13. The FTSE 250 jumped 119.78 points to 11.043.83.

Wall Street was up 170.93 points to 12,744.20 in early trading in response to investment bank JP Morgan’s quarterly figures which beat expectations despite the $4.4bn loss from the ‘London Whale’ credit trading debacle.

Copper miner Kazakhmys advanced 42.5p to 744p following a sexy suggestion from broker ING that it could swap its 26 per cent stake in Eurasian Natural Resources (15.2p better at 408.8p) for Glencore International’s (7p dearer at 316.65p) 51 per cent stake in Kazzinc, which owns 100pc of the Vasilkovskoe Gold mine in Kazakhstan.

Berenberg’s clients switched on again to broadcaster ITV, 2.7p brighter at 74.95p, after the broker reiterated its overweight stance. Punters also hoped that Japanese firm Dentsu’s £3.2billion bid for long-time takeover favourite Aegis, up 0.2p further to 235.5p after Thursday’s leap of 73.1p, could spark a bid frenzy in the media sector.

Speculation that this week’s shock profits warning from Britvic, which wiped almost £100million from its valuation, could see a cash-rich private equity player come calling, helped shares of the soft drinks group rally 12.4p to 273.1p. Britvic has had to recall its Robinsons Fruit Shoot line because of the bottles’ dodgy plastic cap which could endanger children. The hit on group profits is £25million.

EMIS, which supplies software to doctors and pharmacies, closed a healthy 31p up at 648.5p. Trading for the half-year has been slightly ahead of expectations. The UK market remains strong with more than 52 per cent of GP practices having an EMIS system and 36 per cent of high street pharmacies having an RX Systems application.

Bayfield Energy gushed 5.5p to 18.5p following completion of well B3 on its Trintes field offshore Trinidad, bringing it on production at a rate of 536 barrels of oil per day.
Oil and gas minnow Wessex Exploration closed flat at 6.75p following news that Andy Yeo has become chief financial officer. Eyebrows would have been raised in some quarters, though, when it was also revealed that Yeo and chairman Malcolm Butler have been granted new options to buy up to 5m shares at 7p a pop. Didn’t French integrated oil company Total unsuccessfully bid 10p a share for the company earlier this year?

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