Undergoing transformation

I’m talking about Mulberry Group (LSE:MUL). It’s a British luxury brand best known for designing and selling high-end leather goods, particularly handbags. It has a big focus on its ‘Made in England’ heritage and was a much larger brand a decade ago.

Yet over the past year, the stock has risen by 13%, with it currently at 95p. Despite the company still being loss-making, the rise in the share price reflects growing optimism about the turnaround at the business. In the H1 results from last November, losses narrowed significantly to £6.9m from £15.7m, while gross margins improved to around 69%.

This was thanks to a shift away from discounting and tighter cost control. Operating costs were cut by 16%, and management has been actively closing underperforming stores and streamlining the business. In classic turnaround fashion, the company is becoming leaner, a stance I like to see that typically then leads to profitability further down the line.

There’s also a strategic reset under way. Management is refocusing on Mulberry’s core strength, which I agree is its British heritage. It’s pulling back from weaker international markets and focusing on driving growth in key regions like the UK, Europe and the US. In fact, some channels have already returned to growth, even as the broader luxury market remains soft. And only last week it announced a return to the publicity-generating ready-to-wear segment with headline-grabbing designer Christopher Kane in charge.

Undervalued when looking ahead

With a market cap of £68m, the stock is trading at well under 1x annual sales, which I use as a fair benchmark. The price-to-sales ratio is just 0.58. For comparison, Burberry has a ratio of 1.58. This highlights to me that the stock could be undervalued.

If the company can simply return to modest profitability, the earnings recovery could be significant, and the rating could expand quickly. In other words, the share price is still factoring in a lot of bad news.

But when I look ahead, I actually see plenty of reasons why the company could do well. First, cost savings (targeted efficiencies at around £5.9m annually) should feed directly into margins. Second, even a stabilisation in luxury demand could help, given how weak the recent period has been. And third, the brand still carries intangible value that isn’t fully reflected in the current share price. It’s a classic British brand that I think still resonates with many people.

Of course, there are risks involved. The biggest issue I see is that the business is still loss-making, with negative margins and declining revenues. This ultimately can’t continue if the company is going to survive (and thrive). And its share aren’t very liquid with the vast majority held by controlling shareholder Challice and by Frasers Group. Yet even with this concern, I think it does look good value and could be considered by investors.

The post I think this undervalued penny stock has serious potential to outperform appeared first on The Motley Fool UK.

Beleaguered luxury brand

The first stock’s Mulberry Group (LSE: MUL). Shares of the luxury accessories maker have fallen 76% in just under four years!

This has seen the company’s market-cap slump to just £63m. Part of me thinks that’s too low for a company that posted £153m in FY24 sales (which ended in March). On the other hand, Mulberry’s being hammered by the global slowdown in demand for luxury goods.

In November, the company reported that revenue dropped 19% to £69.7m in the six months to the end of September. Sales fell in every region, with particular weakness in Asia. Gross margin contracted to 66.5% from 70.4% and the loss widened by 23% to £15.7m. Grim stuff.

The company doesn’t see things picking up anytime soon, saying the “wider macro-economic environment, including ongoing inflationary pressures, continues to present uncertainty and challenges“.

Now, Mulberry’s the UK’s largest designer and manufacturer of luxury leather goods. I don’t like to see the British brand suffering like this. So I hope new CEO Andrea Baldo is successful in cutting costs, renewing the brand, and restoring profits.

Perhaps he’ll succeed, or maybe the firm will be acquired at a higher price (though it rejected two bids from Frasers Group last year). Truth is, I haven’t the foggiest what’s going to happen. With the firm posting losses, there’s just far too much uncertainty for me to invest here.

Not ready for lift-off

The next penny stock I’m not touching with a bargepole in February is Virgin Galactic (NYSE: SPCE). This is the space tourism business founded by Sir Richard Branson.

The share price has suffered a supernova collapse, plummeting 99.5% in four years!

The company’s listed in the US, where there’s a slightly different definition of a penny stock. It’s typically defined as one that trades for less than $5 and has a low market-cap. That certainly describes Virgin Galactic, with its share price at $4.50 and a meagre $130m market cap.

What’s gone wrong? Well, the company conducted its final spaceflight last summer before announcing a two-year pause in commercial operations to focus on building its next-generation spacecraft. So there’s almost zero revenue coming in until at least 2026.

In Q3, it burnt through $118m of cash, leaving $744m in cash and equivalents. While that sounds a lot, cash burn’s expected to have risen to between $115m and $125m in Q4. At that rate, it probably won’t have enough to fund itself through to mid-2026.

The solution? Keep selling more stock, massively diluting shareholders in the process. This isn’t new, as the share count history shows.

Now, I do support Virgin Galactic’s mission to fly thousands of private astronauts to space. Seeing our planet from above famously changes perspectives in a profound way (known as the ‘Overview Effect’). If space travel can bring humanity together, then I’m all for that (its retired spacecraft was called ‘VSS Unity’ for this reason).

However, I doubt such idealism will do much for my portfolio down here on Earth. So I’m sitting this one out.

The post 2 penny stocks I’m avoiding like the plague in February appeared first on The Motley Fool UK.

So could owning penny shares let me benefit from this bonanza if it materialises?

Investing for the right reasons

Some people buy shares hoping for a takeover. That strikes me as closer to speculation than investment. I am happy to invest in a company I think could be taken over, but not only for that reason. I always want to try and buy shares in great companies at an attractive price.

What happens when a company’s taken over

When a company gets taken over, owners of its shares are effectively forced to sell to the buyer at a certain price. That can seem (and may in fact be be) good as often it represents a sharp increase on the price the share was trading at prior to the offer.

For long-term investors though – and I believe in long-term investing – it can mean being forced to sell a share for less than one paid for it.

As an example, consider luxury leather goods brand Mulberry (LSE: MUL). The company has repeatedly dipped into penny share territory so far this year. That clearly excited major shareholder Frasers Group. It bid 130p a share and then upped its offer to 150p per share.

If I had bought Mulberry shares in late July at around 98p apiece, it could have meant a successful bid would see me netting a return of over 50% in a matter of months.

The choice is sell – or sell

But what if I had bought shares in the struggling firm long before, believing its strong brand, distinctively British positioning and luxury price point could make for a great business?

In 2012, Mulberry was selling for close to £24 per share. So a takeover even at £1.50 per share, let alone £1.30, would mean that £1,000 invested then would have turned into less than £63.

Frasers owned over a third of the company already (a 37% stake). But Mulberry’s biggest shareholder owned more than half of all shares and decided to reject the offer. If it had accepted it and the takeover proceeded, other shareholders would have had no choice but to sell their shares at the agreed price.

One risk I see with penny shares

In that example, one shareholder had a big enough stake to make it highly involved in rejecting the bid. But penny shares often have a fragmented base of small shareholders. That can mean few if any have sufficient incentives to fight what they see as a lowball takeover offer.

Contrast that to large companies where institutional shareholders typically have a big enough financial interest to motivate them to get involved in fending off bids they think materially undervalue a company.

So I think a spree of takeovers in 2025 could in fact be a threat to some long-term owners of penny shares they believe are undervalued, rather than an opportunity.

The post Could a 2025 penny share takeover boom herald big profits for investors? appeared first on The Motley Fool UK.

So here are two small-cap UK stocks. They both sit just outside penny stock territory — for different reasons — and both could benefit from long-term trends relating to premiumisation and sustainable consumption trends.

Mulberry

Mulberry (LSE:MUL) stock has underperformed over the past 12 months. The luxury goods brand reported a 4% fall in revenues for 2023 as demand for high-end products slumped.

In the final quarter of 2023, revenues fell 8.4% compared to the previous year. With earnings moving into the red, the share price has sunk, falling 55% over 12 months. The stock currently has a market-cap of £63m and is trading just outside of penny-stock territory at 110p. 

Thankfully, Mulberry isn’t an outlier in the luxury goods sector. LVMH, Kering, and Burberry are among the big names that alerted us to falling demand in the sector. China’s a notable proponent of this falling demand.

However, in the long run, I’d expect to see Mulberry benefit from positive trends in sustainable fashion and a movement towards premium buying trends. High-end fashion stocks tend to trade at high multiples because of the premiumisation trends and strong margins.

But Mulberry’s currently loss-making, and it’s trading around 18 times earnings from 2022. So it’s hard to say the company looks particularly cheap.

Mulberry’s in dire need of a change of fortunes. It’s certainly possible, with the company making sensible investments in new stores in Australia and Sweden as well as ongoing investments in technology aimed at supporting future growth.

But I’m not investing in Mulberry until I see more signs of a turnaround. However, in the long run, I would be surprised to see this stock explode. 

Chapel Down

English wine’s on trend. It’s unique, it’s award-winning, and while output is just a fraction of Italy, France, and Australia, investments in new acreage over the past five years have resulted in rising volumes. 

Chapel Down’s (LSE:CDGP) at the forefront of the British wine industry, producing around 30% of total volume. Situated on Kent’s chalky terroir, Chapel Down produces high-end, award-winning wines as well as some of England’s most reasonably priced bottles. Its volume, range, and quality have allowed it to become the country’s leader in terms of market penetration and brand awareness. 

The company’s already benefitting from premiumisation trends. Young consumers especially are increasingly keen on trying new and more premium wines. Anecdotal evidence suggests this trend started during the pandemic when people had little else to spend their money on.

However, those who bought more premium wines haven’t reverted to buying cheaper as they may have done before the pandemic. Equally, Gen Z is drinking less — that’s a worry — but is targeting better quality products. 

It’s currently a bit on the expensive side, trading around 70 times earnings. But it’s on a strong growth trajectory, with sales expected to register a double-digit increase in 2024. It also has £34.3m of assets, including £22.6m of wine stock. 

The post Two small-cap UK shares that could explode in the long run! appeared first on The Motley Fool UK.

A fall from grace

Investing in penny stocks, or almost penny stocks, is inherently riskier than investing in more mature companies. These are stocks that can experience considerable volatility given their lower levels of capitalisation. Moreover, there tends to be a wider spread between buying and selling prices. 

It’s also worth highlighting that only a fraction of the stock is publicly held, and this can heighten volatility. Mike Ashley-backed, FTSE 100-listed Frasers Group controls a 37% stake and Malaysian billionaire Ong Beng Seng owns a 56% stake.

Mulberry isn’t quite at penny stock levels, but it’s almost there. The company’s market-cap has also fallen dramatically in recent years — currently just £63m. 

So what’s happened?

Over the past year we’ve seen weakness in the luxury goods market. In the year ended March, Mulberry said group revenue declined 4% from the prior year. This was expected to some extent following a disappointing Christmas period. Moreover, we’ve also seen luxury goods groups, including LVMH and Gucci owner Kering, sounding the alarm bells. 

Internationally, Mulberry noted that retail sales were up just over 7%, but UK sales fell 3.2%. International sales were helped by the opening of new stores in Sweden and Australia, but these investments also contributed to an expected loss for the year. 

Likewise, in a challenging market, Mulberry’s full-price strategy appears to be missing the target as consumers increasingly take notice of promotional offers elsewhere. This was compounded by the UK government’s decision to scrap VAT-free shopping for international visitors. 

More pain to come?

Management said it would be prudent to assume that recent negative trends will continue for the near term. The Asia-Pacific region had represented around 40% of the company’s market, with South Korea and China reflecting some of the most promising international markets. However, a challenging backdrop in China has negatively impacted company-wide growth. 

And despite a pledge from chancellor Jeremy Hunt to review the scrapping of VAT-free shopping, there was a missed opportunity in his last budget so it’s far from guaranteed.

The upside is that Mulberry’s been building brand awareness and market penetration in the lucrative North American market. Australia also bucked the trend in the Asia-Pacific region, with sales moving in the right direction. 

Moreover, in the long run, I expect Mulberry to benefit from premiumisation trends and the movement towards sustainable patterns of consumption. 

The bottom line

Luxury stocks have taken a beating in recent months, and clearly there could be more pain to come before things get better.

Interestingly, the stock’s only covered by one City brokerage which has maintained a price target of 308p for the beaten-down AIM stock — 180% above the current price. However, with a ‘hold’ rating, it appears the broker hasn’t updated its appraisal of the stock. 

As much as I’d love to invest in a company from my home county (Somerset) I’d need clearer signs the business is on the right track. It is, of course, tempting to invest in a brand that was once worth many times more than today. And there’s nothing to say the good times couldn’t return. 

The post This beaten-down ‘almost’ penny stock trades 180% below its target price!  appeared first on The Motley Fool UK.

At £1.20 today, the share price of one AIM-listed stock on my watchlist is quickly sinking towards penny stock levels. Just a year ago, it traded for £2.45 and back in 2012 the shares were changing hands for nearly £24 each. That’s a cataclysmic 95% fall from the stock’s all-time high to today.

The company I’m talking about is luxury leather goods and handbags producer Mulberry Group (LSE:MUL), which currently has a market cap of just £72.3m. So, is this iconic British fashion brand worth considering today at a 52-week low?

Here’s my take.

Share price slump

The Mulberry share price has suffered amid a wider downturn for the luxury goods sector that has affected other high-end retailers like Burberry Group.

The UK government’s 2021 decision to scrap VAT-free shopping for international visitors has acted as a key headwind. Furthermore, Mulberry’s difficulties have been compounded by China’s struggling economy. The country’s shoppers are hugely important in supporting demand for luxury brands.

As a result of these factors, the group’s latest trading statement for the crucial Christmas period was disappointing. In the final quarter of 2023, revenue fell a significant 8.4% compared to the previous year.

Despite the challenges, Mulberry resisted the temptation to offer discounts on its products. Gross margins remained in line with those reported in the first half of the year, which was encouraging to see.

However, against a backdrop of what the board describes as an “unusually high promotional environment” in the wider sector, I’m worried Mulberry’s current full-price strategy might be unsustainable.

Ultimately, the group may not be able to preserve its margins if it’s forced to resort to price cuts in a battle to retain market share.

Destined to drop below £1?

Mulberry isn’t a penny share just yet, but it’s not far off. But with a price-to-earnings (P/E) ratio of 21, the stock isn’t as cheap as investors might expect after the huge share price fall. Given the challenging climate, further declines can’t be ruled out.

Moreover, boardroom turbulence doesn’t point to a happy ship at present. This is unlikely to do much good for investor confidence.

Mike Ashley’s FTSE 100-listed Frasers Group controls a 37% stake in the company. However, management blocked the retail magnate’s attempt to join Mulberry’s board last year. The group’s still ultimately controlled by Malaysian billionaire Ong Beng Seng, who owns a 56% stake.

Optimists might point to Chancellor Jeremy Hunt’s pledge to review the decision to axe duty-free shopping for tourists. A reversal in the government’s tax policy would certainly be a welcome development for Mulberry shares, but this isn’t guaranteed.

Should I buy?

Overall, if Mulberry fails to reverse the decline soon, its share price could sink below £1. That would confirm a fall into penny stock territory.

Although some investors may be tempted to buy at those price levels, the risks facing the retailer look too great to me at present.

A more attractive UK tax regime could lead me to change my conclusion, but I’m avoiding this stock for now.

The post Should I rush to buy this ‘almost’ penny stock at a 52-week low? appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Premier Miton

What it does: Premier Miton is a UK fund manager that provides a wide range of actively managed funds and investment trusts.

By Roland Head. Premier Miton (LSE: PMI) has had a tough year, but I think it could be the right time for me to buy shares in this well-respected firm.

It’s normal to see fund managers’ profits fall when markets slump. This is because their fee income is based on the value of assets under management.

However, while Premier’s share price has fallen by nearly 50% in 2022, pre-tax profit for the year to 30 September only fell by 15%. That’s left the stock looking cheap to me, trading on 13 times forecast earnings, with a dividend yield of 8.5%.

There’s obviously a risk that the dividend could be cut if market conditions worsen next year. However, I think it’s more likely that conditions will stabilise and the payout will be held.

In my view, this is a good opportunity to buy into this cyclical business. I think the shares could do well from current levels.

Roland Head does not own shares in Premier Miton.

Bioventix 

What it does: Bioventix produces monoclonal antibodies to sell to customers for use in commercial and research applications.  

By James J. McCombie: Bioventix (LSE: BVXP) is a £192m biotech stock that trades on the Alternative Investment Market (AIM). This small-cap biotech stock has growing sales and turns a profit. In fact, it’s been profitable for years and its bottom-line number is increasing. It generates plenty of free cash flow and pays a steadily increasing dividend. 

The stock is a little expensive compared to its industry and the wider market, trading at a P/E ratio of 23. However, for a company with increasing sales, a massive 79% operating margin, and consistent earnings power, I think it’s a price worth paying for the quality of the business. 

But new product development is a long and relatively expensive process to get all the way to approval. There is always a chance, as with all biotech and research-heavy companies, that what Bioventix risks today will not be rewarded in the future. 

James J. McCombie does not own shares in Bioventix 

On the Beach

What it does: On the Beach Group is a Manchester-based online retailer of beach holidays.

By Paul Summers. As a shareholder of On the Beach (LSE: OTB), I can’t say that 2022 has been all sunshine and fun. Notwithstanding this, I’m beginning to think the worst might be over.

Recent trading has been encouraging. Revenue for FY22 jumped 373% on the previous year and is back to pre-Covid levels. If this continues, I expect profit to seriously recover in 2023, especially as this small-cap already has a 20% share of its niche market.

That said, nothing can be guaranteed. Clearly, the consumer slowdown could delay a sustained rise in earnings and, ultimately, the share price.

I think the valuation of 12 times earnings takes account of this. Moreover, On the Beach’s finances look stable, helped by the fact that its online-only model means it can cut marketing spend quickly and painlessly if needed.

I’m considering topping up my position in this small-cap stock.

Paul Summers owns shares in On the Beach.

Mulberry

What it does: Mulberry is a British fashion company best known for its luxury leather goods, particularly women’s handbags.

By John Choong. Luxury stocks tend to hold up rather well during a recession. This is because of the Veblen effect, which is a phenomenon where consumers perceive higher prices to constitute higher value. As such, I’m expecting Mulberry (LSE: MUL) to benefit from this.

Its share price may be down over 20% this year, but recent developments surrounding its key market, China could spell strength for the luxury brand. After all, analysts at Shore Capital noted that Mulberry is “well positioned to deliver on the Asian-focused geographical expansion and potential product extension strategy”.

Currently trading at a lucrative PEG ratio of 0.1, the luxury stock screams a bargain. This is especially the case when I consider the stock’s upside potential. As the world’s most affluent consumers wait to spend big in the coming months, it’s not difficult to see why Barclays has a price target for the stock at £3.40. This presents me with a 36% potential upside if I were to buy its shares today, and is something I’m deeply considering.

John Choong has no position in any of the shares mentioned.

Argentex

What it does: Argentex is a financial services company that provides foreign exchange (FX) services to institutions, corporates, and private individuals.

By Edward Sheldon, CFA. Argentex (LSE: AGFX) appears to have a lot of momentum right now.

In November, the company posted strong results for the six months to 30 September, with revenue coming in at £27.4m, up 75% year on year, and adjusted operating profit amounting to £7.3m, up 55% year on year.

Then, in December, the company told investors it expected revenue and earnings for 2022 to be ahead of market expectations.

I don’t think this strong momentum is factored into the share price, however. Currently, the stock has a relatively low valuation.

Going forward, revenue growth could moderate. In recent months, FX volatility has been elevated and the company will have benefitted from this.

I think the company has the potential to keep growing at a healthy rate though. And at the current valuation, I see a lot of appeal in the small-cap stock.

Edward Sheldon has no position in Argentex.

Gateley Holdings 

What it does: Gateley Holdings is an AIM-listed commercial law firm with 15 offices in Britain and one in Dubai. 

By Royston Wild. I think Gateley Holdings (LSE:GTLY) could be a top value stock for me to buy in January. The company is tipped to enjoy an 8% rise in annual earnings this fiscal year (which ends in April 2023). This leaves it trading on a forward price-to-earnings (P/E) ratio of 11 times. 

On top of this, the company offers up a tasty 5.5% dividend yield. 

Gateley provides a range of legal and professional services in sectors such as banking and financial services, property, and pensions and benefits. And right now the business (which has a market cap of £220m) is trading extremely strongly. 

Latest financials in November showed revenues up 22% in the six months to October and an 11% rise in underlying adjusted pre-tax profit.  

I’m expecting Gateley to announce that trading has remained robust when it next updates the market on Wednesday, 18 January. This could lead to fresh share price gains. 

Royston Wild does not own shares in Gateley Holdings. 

Anpario

What it does: Anpario designs and manufactures specialised animal feed additives to improve livestock healthcare.

By Zaven Boyrazian. Despite the rising popularity of plant-based foods, meat and fish protein consumption continues to surge. And that’s driven quite a bit of demand for small-cap stock Anpario (LSE:ANP).

The business is a manufacturer of specialised animal feed healthcare additives. Farmers blend Anpario’s products into their livestock’s food to achieve superior health, toxin management, hygiene, and insect control. The result is a better quality of life for the animals, reduced medical expenses for farmers, and higher quality protein for consumers.

The business has recently completed an expansion of its UK factory, drastically improving its production capacity. The timing is impeccable, given recent regulatory changes in China have banned a significant chunk of its competitors’ products, creating a window of opportunity.

The firm’s reliance on a single factory does introduce some risk. After all, any prolonged disruption at the facility could result in customer orders being fulfilled by rivals. But given the importance of its industry, this risk seems worthy of the potential long-term rewards.

Zaven Boyrazian does not own shares in Anpario.

The post Best British small-cap stocks to buy for January appeared first on The Motley Fool UK.

Wise (FY22 earnings)

Wise (LSE: WISE) is a fintech company that provides a money transfer service. It allows customers to send money abroad and get paid in other currencies. Wise is expected to unveil its FY22 earnings results for the year ending March 2022 on Tuesday 28 June.

Although there’s no previous record to compare with in terms of earnings per share (EPS), the earnings preview indicates that revenue is expected to grow by 32%. This is seen as generally positive as Wise continues to take market share from the likes of PayPal and Western Union. Having declined over 60% since its initial public offering, a better-than-expected number on its top and bottom lines could see the Wise share price recover from its bottom.

Moonpig (FY 22 earnings)

Moonpig (LSE: MOON) is an internet-based business. The company makes its money mainly from selling personalised greeting cards, flowers, and gifts. The FTSE 250 firm is expected to release its FY22 earnings results for the year ending April 2022 on Wednesday 29 June.

Moonpig is expecting to show a slight decline in revenue for the most recent year. This is due to the slowdown in sales after the pandemic. Nonetheless, the online business is still expecting its revenue to come in above pre-pandemic levels, with its bottom line also showing an improvement.

Mulberry (FY 22 earnings)

Mulberry (LSE: MUL) is a British fashion company. It is best known for its luxury leather goods, particularly women’s handbags. The small-cap company is expected to post its FY22 earnings results for the year ending April 2022 on Wednesday 29 June.

The earnings preview points towards a slight growth in revenue despite a slow down in retail sales lately. This is due to its status as a luxury brand. Due to a lack of liquidity in the stock, its share price has largely stayed unmoved this year. Consequently, there’s a lack of coverage on the stock. Nonetheless, higher revenue with a better EPS could have investors jumping for joy, sending the stock higher.

The post Earnings preview: Wise, Moonpig, Mulberry appeared first on The Motley Fool UK.

Is something in the works? In my experience I have seen that when a share’s price shows sharp movement without any apparent reason, sooner rather than later important information surfaces that was probably just speculation earlier. It is possible that something like that has happened in the case of Mulberry.

As an investor, I am not one for giving in to speculation, however. I like solid stocks whose performance and prospects can be verified. And that is the lens through which I would like to assess this stock too. 

Mulberry’s performance improves

First, let me consider its share price performance. In the past year, Mulberry has not disappointed. Quite the contrary. Its share price more than doubled between June 2020 and May 2021. It has declined since, possibly as investors sold off its shares at a profit. However, in relative terms, the share price is still high compared to last year. Higher by a whole 75% actually. 

This is a pretty good performance. And thankfully, it is not all inexplicable. A couple of months ago, the company disclosed that it expects a small pre-tax profit for the year ending March 27 2021. Clearly, this means that the company’s performance picked up significantly in the second-half of the year. During the first half, it had reported a pre-tax loss of £1.9m. 

The future looks good too

It also said that this is because of “continued strong growth” in its Asian markets, a pick-up in online sales and fewer discounted sales. These factors make me optimistic about Mulberry’s future, as does the fact that Asia-Pacific accounts for around 40% of its revenues. China and South Korea are its promising markets in this region. China is a big market and its growth has picked up substantially in the past year, which bodes well for demand in the future. 

Also, a successful pivot towards online sales will be key for retailers going forward. And Mulberry has already shown some success in that. More than half of its total sales were digital in the first half of the 2020-21 financial year. I am sure this is partly because of the lockdowns, because in the year before, the number was much smaller. But I also believe that it is likely that some sales have permanently moved online. It is to the brand’s credit that it has been able to drive up online sales significantly. 

But there are still questions

Yet I am uncomfortable with the constant fluctuations in its share price (it is down over 3% so far today, for instance). Also, its financial performance has been underwhelming in the past few years. Will it be able to turn around sustainably? I do not know.  Mulberry is on my watch list, but I would not buy it yet. 

The post The Mulberry share price was up 25% yesterday. Would I buy? appeared first on The Motley Fool UK.

Meanwhile, luxury goods retailer Mulberry Group (LSE: MUL) saw its stock climb 20%. Shares in the fashion firm have risen by more than 50% over the last year.

What’s happened — and why are shareholders seeing these big moves today?

Travis Perkins share price falls on Wickes split

Shares in FTSE 250 builders’ merchant Travis Perkins are falling today, but this isn’t due to any bad news from the company. What’s happened is that the Wickes business, owned by Travis Perkins, has now been spun out into a new company.

Travis Perkins’ shareholders will shortly have shares in Wickes credited to their share accounts. Wickes shares will trade on the London market under the symbol WIX.

Today’s share price fall reflects the loss of the value of the Wickes business. But Travis Perkins shares could rise again in the next few days, as the firm plans to carry out a share consolidation.

This means Travis Perkins’ existing shares will be replaced with a reduced number of new shares. The number will be calculated to try and “maintain broad comparability” in Travis Perkins’ share price before and after the demerger.

All of this will happen automatically — existing shareholders will see the TPK shares in their accounts replaced with new shares. The overall effect should be that the combined Travis Perkins and Wickes shares will be roughly equal to the value of Travis Perkins shares before the split.

Of course, the two companies will trade independently now, and their values may move in different directions, over time. Shareholders who don’t want to own shares in both businesses can choose to sell either Travis Perkins or Wickes.

Why split?

The reason given for the split is Travis Perkins is focused on larger trade customers, whereas Wickes is focused on DIY, home improvement and local trades — the “do it for me” market. Travis Perkins’ management believes both companies will be able to perform better independently.

Even before today’s split, both companies were said to be trading well. On 15 April, Travis Perkins issued a first-quarter trading update reporting “an encouraging start to the year.” Management said first-quarter sales at Travis Perkins and Wickes were significantly ahead of the same period last year.

Mulberry share price rockets 20%

Luxury handbag group Mulberry has been through a tough time in recent years. Mulberry’s pre-tax profit has fallen from a high of £36m in 2012 to a loss of £48m in 2020. This slump wasn’t just due to the pandemic — the group reported a £5m loss in 2019.

Finally, shareholders have had some good news. The company says that sales during the year to 31 March have been better than expected. This is due to stronger online sales and reduced discounting.

Mulberry had been expected to report a loss for the year just ended, but the company now expects to report “a small underlying profit before tax” for 2020/21.

Mulberry’s share price remains more than 85% below the highs of over 2,100p seen in 2012. But the company’s performance does seem to be improving. More details are expected in July, when Mulberry will publish its 2020/21 results.

The post Travis Perkins and Mulberry are today’s big share-price movers: here’s why appeared first on The Motley Fool UK.