Mulberry warns over House of Fraser profits hit

Mulberry has warned that profits could take a £3 million hit following the collapse of department store chain House of Fraser.

The upmarket handbag maker said that the group's profit for the year "will be materially reduced" as a result of flagging UK sales, particularly in House of Fraser, where it operates 21 concessions and employs 88 people.

Mulberry shares collapsed by nearly 30% in early trade.

"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 said.

House of Fraser collapsed into administration a week and a half ago, before being snapped up by Mike Ashley's Sports Direct.

However, it is unclear how many stores Mr Ashley will keep or what terms he will offer to concession partners.

Mulberry said that following a review of potential costs that may result from restructuring the concessions, the group is provisioning £3 million in exceptional costs for the first half of the year.

Mulberry was owed about £2.4 million at the time of House of Fraser's collapse, but Mr Ashley has said he will not pay creditors for debts prior to his takeover.

The upmarket firm added on Monday that trading in the rest of the world continues to develop "broadly in line" with management's expectations, adding that it has a "strong cash position".