Mulberry RTW Spring 2018

LONDON — Mulberry said Monday that its profits would be hit by House of Fraser’s collapse and saw its shares plummet 30 percent as a result.

The luxury handbag company issued a trading update after House of Fraser, in which it operates 21 concessions, entered into administration on Aug. 10. Mulberry said it expects to spend 3 million pounds for exceptional costs in the results for the six months ended Sept. 30.

The company’s share price declined to 4.85 pounds at 10:30 a.m. GMT on Monday.

“Since the group reported in June 2018, the U.K. market has continued to remain challenging and sales in House of Fraser stores have been particularly affected,” the trading update stated.

On Friday, Ernst & Young released a report outlining the amount of debt House of Fraser owes to its creditors. Mulberry, which is owed 2.4 million pounds, was cited alongside other brands including Prada and Versace.

The fallout from House of Fraser’s woes is one of the many changes that Mulberry is adapting to. Last year, under the creative direction of Johnny Coca, the brand shifted to a see-now-buy-now model in the hopes to mirror the success of other luxury brands like Burberry, but Mulberry has yet to see the same impact and continues to struggle to revamp its image.

The company’s sales and profits were broadly flat in the U.K. in the year ended March 31 and in the prior fiscal year, the company cited low footfall traffic and fewer tourists as a result of sales in the U.K. declining 9 percent.

However, in its most recent fiscal year, international sales were up 20 percent as Mulberry continued to tighten its distribution by taking direct control of its Asia business and investing in new subsidiaries in the region. In June, Mulberry announced that it moved its South Korean operations in-house and invested 4.6 million pounds to develop the business with existing South Korean partner, SHK Holdings Ltd.

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