Mulberry founder: brands will “think very hard” about working with House of Fraser

A Mulberry store in London, England.

Mike Saul, the founder of Mulberry (LON: MUL), has said that luxury brands will “think very hard” about continuing to stock House of Fraser following administration.

Speaking on the BBC’s Today programme, Saul said the “reverberation around the designer fashion world is fairly enormous” and the collapse would usher in a “fundamental change to how retailing will work”.

Since Mike Ashley’s purchase of House of Fraser in the £90 million deal, it has emerged that the suppliers of the department store would not be paid millions of pounds of debts.

“You’ve got Gucci, Prada, Ralph Lauren (NYSE: RL), Diesel; a large number of good, high-end brands that have good operations that have been hit by this,” said Saul on Wednesday.

“Because House of Fraser has a stretch throughout the whole of the UK with its store group, effectively many brands have chosen that as their route to the market or consumer around the UK, outside of London where they have their own stores.”

“So it does mean that this is a fundamental change to how retailing will work and brands will have to think very hard, ‘do I stay with Mike [Ashley] in his new form, what will his new form be?” he added.

Mulberry’s share price plunged 30 percent on Monday after the group said it would be taking a £3 million following House of Fraser’s administration.

The group also said that if current tough UK trading continued into the second half of the year, full-year profits could be “materially reduced”.

“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,” said the group in a statement. 

“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.”

“Trading in the rest of the world continues to develop broadly in line with management’s expectations. The group is in a strong cash position and continues to follow its strategy to develop Mulberry into a global luxury brand.”