Frasers makes bid for Mulberry following lacklustre FY24 and capital raise announcement

Frasers Group has announced that it has made a bid for the struggling luxury brand Mulberry on the back of the company’s FY24 financial report in which it revealed that there was a “material uncertainty going concern”. Frasers, which currently owns 37 percent of the British brand’s shares, said it would “not accept another Debenhams situation where a perfectly viable business is run into administration”.

As such, it has now come forward with a Possible Offer, for which shareholders would be entitled to receive 130 pence in cash for each Mulberry share. This amounts to 83 million pounds for the entire issued, and to be issued, ordinary share capital of Mulberry, or 52.4 million pounds for the shares Frasers does not own. Fraser said that the cash consideration would be funded from Frasers existing cash resources, with the group noting that it was “very well capitalised with a significant level of cash financial fire power”, as revealed in a prior report from July.

Mulberry swings to loss as group revenue drops 4 percent

The move comes on the heels of a “challenging year” for Mulberry, which has been subject to a tricky luxury landscape also experienced by other brands of its calibre. In its FY24 report, for the 52 weeks ended 30 March 2024, the company said it had faced an accelerated decline in consumer spending “due to the adverse macroeconomic environment”, particularly in its home region of the UK where discretionary spending and tourism remained around 8 percent lower than before the pandemic in 2019.

Revenue for the period dropped to 152.8 million pounds from 159.1 million pounds in the year prior, while the company ultimately swung into a loss, dropping into an operating loss of 29.1 million pounds, down from a profit of 17 million pounds in FY23. Profit before tax in 2023 came to 13.2 million pounds, however, this too came to a loss in FY24, at 34.1 million pounds. Gross profit, meanwhile, also fell, dropping from 113.2 million pounds to 107.1 million pounds.

In the UK, retail sales came to 84.7 million pounds, down from 87.7 million pounds in the year prior, while in Asia-Pacific, retail sales also decreased by 4 percent to 27.7 million pounds. There was promise among international retail sales, however. Here, figures increased by 9 percent to 50 million pounds, while digital sales also rose 4 percent to 50.6 million pounds. In a letter addressing the results, chairman Christopher Roberts said: “Historically, softness in one region would normally be offset by growth in another, however the slowdown during the period has been across all regions and has materially impacted our full year performance.”

Mulberry seeks to raise 10 million pounds in Retail Offer

In light of the waning financials, Mulberry announced a subscription of new ordinary shares by Challice, a majority shareholder, to raise around 10 million pounds, as well as options to allow other shareholders to participate in this capital raise. In the announcement, Mulberry said it would “use the net proceeds of the capital raising to strengthen the group's balance sheet and provide financial flexibility to support plans being developed by Andrea Baldo, the new chief executive officer and the management team to return the business to profitability and drive future growth”.

This, however, was dubbed to be “wholly unsatisfactory” as a response by Frasers, who said that while the company had been supportive of the brand and commercial opportunities available, it believed it was the “best steward for returning Mulberry to profitability”. It added: “As highlighted in the subscription announcement, as a standalone business, the company is facing unabating difficulties. To name a few, rising costs, macroeconomic headwinds, and increased selectivity from its discretionary customer base.”

Mulberry’s trading appears to continue to look concerning into the current period, with group revenue for the 25 weeks since the end of FY24 reportedly 18 percent below the same period last year. Retail revenue, meanwhile, is down 14 percent in all regions, while international sales are set to drop 16 percent.