£100million wiped off Mulberry in House of Fraser crisis
MORE than £100m was wiped off the value of Mulberry after the upmarket handbag maker revealed it has been hit by the collapse of House of Fraser.
On another dismal day for investors in the company, shares fell 29.7pc, or 169p, to 400p, taking losses so far this year to 62pc.
The latest sell-off came after Mulberry said the turmoil at House of Fraser would cost it £3m.
It also warned that profits would be ‘materially reduced’ this year unless business picks up in the crucial second half.
Neil Wilson, chief market analyst at trading firm Markets, said: ‘This is really a sign of how it’s not just the retailers that are affected by the decline on the High Street, but also some of the key brands that depend on department stores.’
Mulberry operates 21 concessions in House of Fraser stores, with 88 staff. But it is facing uncertainty after the department store chain crashed into administration with debts of almost £1bn.
Among the creditors are hundreds of suppliers who are owed £484m. Mulberry is owed £2.4m.
Although House of Fraser has been bought by Sports Direct tycoon Mike Ashley for £90m, he is not required to pay Mulberry or other suppliers what they were owed when it collapsed due to the deal struck with administrators.
House of Fraser is reviewing its stores and deals with concession holders, potentially meaning Mulberry could face extra costs.
Mulberry has put aside £3m to cope with the fallout. To make matters worse, it warned sales in the uK were flagging, adding: ‘The uK market has continued to remain challenging and sales in House of Fraser stores have been particularly affected. If these sales trends continue into the key trading period of the second half of the financial year, profit for the year will be materially reduced.’
Russ Mould, of broker AJ Bell, said: ‘This announcement is a reminder that victims of the High Street malaise do not just include retailers themselves.’
House of Fraser fell into administration this month after rescue talks collapsed with the exit of a key Chinese backer. Ashley aims to make it the ‘Harrods of the High Street’.
But retail expert Professor Qing Wang, of Warwick Business School, said: ‘The collapse of House of Fraser is affecting Mulberry more than other British luxury brands due to its heavy reliance on stores.’
Mulberry said its global trading continued to meet expectations.
÷ A firm running warehouses for House of Fraser could axe 627 jobs after a row with the retailer’s new owner, unions say. XPO Logistics is owed more than £30m by the department store, prompting the closure of its Wellingborough and Milton Keynes distribution sites.