Mulberry blames high street crisis and House of Fraser woes for loss

mulberry New Vintage - The Hampstead is the first bag from Mulberry 2019 new collection

New Vintage: The Hampstead is the first bag from Mulberry new collection. As a whole, the season makes an optimistic reference to the sixties: a period of joy, revolution, freedom and femininity. photo: mulberry


Powered by Guardian.co.ukThis article titled “Mulberry blames high street crisis and House of Fraser woes for loss” was written by Zoe Wood and Sarah Butler, for theguardian.com on Wednesday 7th November 2018 12.58 UTC

The luxury handbag maker Mulberry has blamed tough high street conditions and the collapse of House of Fraser for widening first half losses.

The company, best known for its Bayswater and Alexa bags, slumped to a loss before tax of £8.2m in the six months to 30 September, compared with £600,000 a year ago, as the failure of House of Fraser wiped out more than £2m of profit. Overall sales fell 8% to £68.3m despite a strong showing overseas.

Maplin, Toys R Us and Jacques Vert have all collapsed in recent months, but several retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts.

Gourmet Burger Kitchen: The upmarket burger chain wants to close 17 of its 85 restaurants via an insolvency process known as a company voluntary arrangement (CVA)

House of Fraser: The department store chain is expected to close about 12 stores after being bought out of administration by Mike Ashley. It had agreed a CVA under which 31 stores were to close, but this lapsed on administration.

Homebase: The DIY chain is closing at least 42 stores after completing a CVA organised by new owner Hilco.  The restructuring expert bought the DIY chain for £1 from Australia’s Wesfarmers who botched an attempt to bring its Bunnings chain to the UK.

Poundworld: The discount retailer has closed all its 355 stores, with the loss of 5,100 jobs after falling into administration in June.

Cau: The owner of the Gaucho and Cau steakhouses fell into administration in July leading to the closure of all 22 Cau restaurants, with loss of 750 jobs. The groups lenders have since bought the 16 Gaucho outlets.

Mothercare: The chain is closing 60 of its 137 outlets after agreeing a CVA in May. Additional closures in July mean 900 jobs will be lost.

Carluccio’s: The Italian chain secured a CVA to close 30 of its 99 restaurants in late May.

New Look: The chain is closing 85 stores in a restructuring plan announced earlier this year. Its chairman, Alistair McGeorge, said the future of a further 39 stores was in doubt as talks with landlords continued.

Carpetright: The retailer obtained a CVA in April to close 92 of its 409 UK stores in September with the loss of about 300 jobs.

Prezzo: In March the Italian-themed restaurant group secured a CVA to close 94 of its 300 restaurants, with the loss of 500 jobs. Rent cuts were agreed on a further 57 locations.

Jamie’s Italian: The chain closed six locations in 2017 and this year agreed a CVA to close about a third of its 35 loss-making outlets.

Byron: The upmarket burger chain is closing up to 20 of its 67 restaurants after a CVA agreed in January.

Debenhams: The under-pressure department store chain has said it could close up to 50 of its 165 stores stores and wants to get rid of space at 30 more by bringing in gyms and other services.

M&S: The high street stalwart wants to close 100 outlets – a third of its main stores by 2022 as part of a ‘radical transformation’ plan.

 

“The group’s UK business remains profitable although sales have been affected by the House of Fraser administration, softer UK demand and lower tourist footfall,” said its chief executive, Thierry Andretta. He said a shift in timing of a key sale period had also affected takings.

Sales at UK stores were down 11% for the half year. Trading has continued to suffer since then with sales at shops open more than one year, excluding House of Fraser, running 7% down over the last six weeks.

But Andretta said that he did not believe there was a problem with Mulberry’s product or strategy.

“We are positive despite a challenging six months,” he said.



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The UK market accounts for nearly 70% of Mulberry sales and the company had already told investors it would suffer a hit on the back of House of Fraser’s administration. The department store chain’s new owner Mike Ashley’s Sports Direct is not obliged to pay the near-£1bn owed to creditors at the time of its collapse and so far only 22 of its 59 stores have been formally saved.

The House of Fraser collapse resulted in a bad debt and asset write-off of £2.1m at Mulberry with sales in the concessions and via the department store’s website “materially lower” during the period.

From mid August, when the department store fell into administration, to the end of September, Mulberry’s sales via House of Fraser halved to £1m from £2m in the same period a year before. The drop is partly the result of the closure of three concessions in the department store chain, where Mulberry still has 17 outlets.

Mulberry wanted to continue working with House of Fraser but, Andretta said, “It is not in our hands, we need to know what they will do.”

Mulberry, the UK’s biggest manufacturer of leather goods, has struck a new deal to open concessions in John Lewis stores, which it previously dealt with as a wholesale customer, as it seeks to rebuild its UK department store business. Mulberry has 18 concessions in John Lewis under the new deal and will be distributing a much wider range of goods via the department store’s website. Andretta said Mulberry might extend the relationship depending on how things developed with House of Fraser.

“In some cities we will need to make a decision but it is not out of one or into the other. Our ultimate goal is to give best in class service for the luxury customer in the UK.”

The deal with John Lewis will result in a £1.4m charge to Mulberry in the second half after it bought back stock from the department store ahead of the move.

 

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