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Mulberry expects profit hit due to House of Fraser collapse

Luxury accessories brand Mulberry issued a profit warning this morning, citing the upheaval at department store wholesale partner House of Fraser as a key reason for the change in outlook.

The company said its bottom line for for the year to 31 March 2019 will be “materially reduced” if sales trends experienced in the first half of the year continue into the second half of trading. The brand indicated House of Fraser sales have been “particularly affected”.

Mulberry operates 21 House of Fraser concessions, employing 88 people across the UK, and after reviewing debtor balances, fixed assets and potential costs that may result from the chain’s restructuring, the brand has put aside £3 million for exceptional costs.

Reports have suggested that House of Fraser owed almost £1 billion to creditors when it went into administration earlier this month, before Mike Ashley’s Sports Direct bought the company – but not its debt – in a pre-pack deal moments after its collapse was announced.

Late last week House of Fraser took the decision to cancel existing online orders and refund affected customers, with its warehouse operator effectively downing tools in a dispute over payments owed from the previous regime.

Mulberry is one of thousands of suppliers set to be impacted by House of Fraser’s demise and reorganisation, but it said other aspects of its business are operating as planned.

“Trading in the rest of the world continues to develop broadly in line with management's expectations and, in August, the group completed the previously announced transaction with its distribution partner to create Mulberry Korea, which became a subsidiary from that date,” it commented.

“The group is in a strong cash position and continues to follow its strategy to develop Mulberry into a global luxury brand. Over the past two years the group has enhanced the international network, particularly in Asia, and will continue to invest in the omnichannel experience and marketing across its international markets.”

Meanwhile House of Fraser’s website is still down today and is redirecting visiting customers to Ashley’s premium department store chain Flannels.com as an alternative shopping option.

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