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Mulberry, first victim of HoF’s collapse ripple effect

By Angela Gonzalez-Rodriguez

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Business

The British upscale fashion and accessories brand has warned that House of Fraser (HoF) collapse will have a negative impact on its finances. Mulberry is one of the many HoF’s creditors that won’t be able to get back the money they lent to the failed department store chain.

Earlier this month Mulberry Group PLC (LON:MUL) issued a profit warning that it could take a 3 million pounds hit from the House of Fraser collapse after new owner Mike Ashley said he won’t paid out to creditors, which include the fashion firm, reported ‘Chronicle Live’.

The profit warning stated that “Since the group reported in June 2018, the UK market has continued to remain challenging and sales in House of Fraser stores have been particularly affected. If these sales trends in the UK continue into the key trading period of the second half of the financial year, the group’s profit for the whole year will be materially reduced.”

Mulberry issues profit warning on the back of House of Fraser’s collapse

Looking ahead, Mulberry expects its profit for the year “will be materially reduced” as a result of weakening UK sales, particularly in House of Fraser, where it operates 21 concessions.

The luxury handbag’s stock lost 30 percent on the day it issued a profit warning, becoming one of the big losers on the AIM the last week of August. Mulberry shares plunged 29 percent to 415 pence, reported ‘Proactive Investors’.

“Exclusive brands like Mulberry are having difficulties adapting to the new trading environment because they rely so heavily on the personal experience they offer to their customers,” said Artjom Hatsaturjants, a research analyst at Accendo Markets cited by the ‘Guardian’.

Hatsaturjants further added that “In effect, what Mulberry is saying is that not only can it quantify direct losses it will suffer now, but that these losses could be compounded further by the same troubles that have been plaguing the UK retails market: changing consumer preferences, lack of significant differentiation between major brands, unyielding Brexit uncertainty and intense competition from online fashion retailers such as Asos and Boohoo.”

Mulberry, Tommy Hilfiger, Kurt Geiger, and Ralph Lauren, bigger losers in HoF’s collapse

House of Fraser had debts nearing 1 billion pounds when it collapsed. Over half of the debt was owed to suppliers including Mulberry, Polo Ralph Lauren, and Pretty Green. In total, more than 1,000 suppliers will be left without getting any money from the company’s administrator, EY, which was called in ahead of the sale of the retailer to Mike Ashley’s Sports Direct for 90 million pounds.

The purchase price from Sports Direct went towards paying off House of Fraser’s banks and bondholders, which together were owed about 400 million pounds, reported the ‘Guardian’.

According to a report from EY accessed by British media, XPO, former HoF’s warehouse operator, is the biggest trade creditor followed by Ralph Lauren, which was owed 9.4 million pounds. Kurt Geiger which was owed 4.9 million pounds while Phase Eight was owed 3.4 million pounds.

Photo: Harlow handbag, Mulberry Official Site

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House of Fraser
Mulberry