Mulberry Shares Plunge 30% after It Warns House of Fraser Collapse Will Hit Profits

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Mulberry Shares Plunge 30% after It Warns House of Fraser Collapse Will Hit Profits

Luxury handbag maker Mulberry has issued a profit warning after the collapse of House of Fraser into administration, shortly before it was bought by Sports Direct.

Mulberry, which operates 21 House of Fraser concessions, said it was expecting to take a £3m hit for exceptional costs in its next trading update for the six months to 30 September.

It comes days after administrators revealed the department store owed £484m to creditors before its collapse.

Mulberry shares fell by 30% in opening trading on Monday following the profit warning.

The company said in its announcement that UK trading "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," it added.

House of Fraser was bought by Mike Ashley's Sports Direct for £90m earlier this month, but the retail tycoon has said he will not pay suppliers any money owed before his takeover.

The chain's administrators Ernst & Young (EY) said the store owed millions to its creditors before its collapse, with companies like Versace, Gucci and Prada among the big names out of pocket.

House of Fraser has also been forced to cancel all its online orders after a dispute with its third-party logistics company, XPO, which it owes £30m.

Mr Ashley bought House of Fraser in a "pre-packaged administration", which means he can drop certain liabilities through the insolvency process.

Most of the money will be used by the administrators to pay banks and bondholders.

Source: Sky News