Upmarket handbag specialist Mulberry has provided further evidence of how tough conditions are for some retailers after fending off a takeover bid from former Rangers shareholder Mike Ashley’s Frasers Group.
Mulberry highlighted the pressure on consumer spending that followed the surge in inflation as it revealed that losses increased by 23% in the first half, to £15.7 million from £12.8m.
The group, which has stores in Glasgow and Edinburgh, saw total sales fall 19% to £56.1m from £69.7m.
New chief executive Andrea Baldo said the results reflected the challenges that are weighing on sector players generally.
“There is no question that our industry is facing a period of significant uncertainty, driven by a challenging and volatile macroeconomic environment that is impacting consumer confidence in several markets, particularly in our home country,” he lamented.
Mulberry is cutting 85 jobs in central functions in London and Somerset to help reduce costs. It has around 1,100 staff in total.
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Consumers limited discretionary spending in response to the surge in inflation that started amid the recovery from the pandemic and the interest rate rises imposed by the Bank of England in response.
Mulberry released the results around a month after Frasers Group decided not to proceed with a formal bid for the business.
In October Frasers made an indicative offer at 150p per share which valued the business at £111m. Frasers said previously that it might offer 130p per share.
The group has a 37% shareholding in Mulberry. It has acquired a range of businesses amid the challenging conditions faced by retailers in recent years.
The group’s portfolio includes House of Fraser stores, Jack Wills and USC. It developed out of the Sports Direct business that Mr Ashley founded in 1982.
In the announcement that it was withdrawing Frasers said that it continued to believe that market headwinds, and a clear lack of commercial plan, placed Mulberry in a very difficult financial position.
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Directors of Mulberry, which makes its handbags in Somerset, have insisted that it can prosper as an independent. Production, warehouse and retail staff numbers are being maintained.
Mr Baldo said Mulberry is an iconic brand which stands out for its rich heritage and craftsmanship. However, he noted: “Though I've only been in the role of CEO for under three months, the first half results illustrate the clear need to reprioritise and rebuild the business.”
He added: “In response to current market conditions, we have taken decisive steps to streamline operations, improve margins, reduce working capital, and strengthen our cash position.”
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Shares in Mulberry closed down 11%, 13p, at 105p.
Frasers has suggested the fact that the Challice business controls 56% of Mulberry could pose governance challenges. Challice is owned by Singapore billionaires Christine Ong and husband Ong Beng Seng.
Challice has said it has no interest in selling its Mulberry shares to the group.
Mr Ashley built up a 9% holding in Rangers. Sports Direct had a kit supply deal with Rangers that ended in 2020.
Mr Ashley sold the last of his shares in Rangers in 2017 to the Club 1872 syndicate of fans groups and private equity investor Julian Wolhardt.
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