Fashion, luxury and lifestyle news aggregator - October 2024

Posted: 31/10/2024

Mulberry snubs Frasers Group’s £111 million bid amid financial turbulence

The owner of British luxury brand Mulberry has rejected a second acquisition offer from Frasers Group. Challice Limited, Mulberry’s majority shareholder holding a 56% stake, described the offer as an ‘unwanted distraction’ and said it had ‘no interest’ in selling its shares in the fashion brand to the retailer. The £111 million bid follows an earlier £83 million offer from Frasers Group, which already owns a 37% stake in Mulberry. Frasers, which owns Sports Direct, House of Fraser department stores and Flannels luxury streetwear brand, said  it made the Mulberry bid because it would ‘not accept another Debenhams situation where a perfectly viable business is run into administration’.

Mulberry has struggled financially over the past few years. It reported a pre-tax loss of £34.1 million for the year ending 30 March 2024, from a £13.2 million profit in the previous year, with sales down by 18%. The termination of shopping tax breaks for tourists post-Brexit has been a contributing factor.

Mulberry’s board has acknowledged Frasers as ‘a committed and important investor’ in the luxury handbag maker but said it had faith in new CEO Andrea Baldo’s turnaround strategy. Despite a disappointing financial performance, chairman Chris Roberts stated he was ‘confident in our [Mulberry’s] long-term prospects’ and reiterated the brand’s plans for a £10.75 million raise of fresh capital to strengthen its balance sheet, in respect of which Mulberry would engage ‘further with Frasers regarding a pro rata participation’.

Interestingly, Mulberry’s founder Roger Saul, who launched the brand in 1971 before leaving in 2002, opined that a European luxury conglomerate like LVHM would be a better fit than Mike Ashley’s Frasers Group.

Frasers have since dropped all plans to buy Mulberry, citing a lack of engagement from the luxury retailer and, in particular, its top investor Challice. It appears Ashley has instead set his sights on fast fashion giant Boohoo after making a public bid for the online retailer’s vacant CEO position, as a solution to what he described as a ‘leadership crisis’ and ‘incompetence’ at the fashion brand.

Hope for the high street?

Many predicted ‘the death of the high street’ following the Covid pandemic. However, recent headlines are more positive, including reports of John Lewis investing £800 million in store makeovers over four years. As part of its plans, the British retailer is re-designing its flagship Oxford Street store, set over eight floors, with this project alone set to cost £6.5 million.

The re-vamped store will include a cookery school and café and represent a complete reversal of its previous plans to convert floorspace to offices. John Lewis is also set to open a new-look beauty hall that will be almost 25% larger than its previous footprint, and the store itself will now contain up to 175 brands. Deputy Mayor of London for Business and Growth, Howard Dawber, said that the investment could help to build a ‘better and more prosperous London for everyone’.

Meanwhile, Saudi Arabia’s sovereign wealth fund, the Saudi Arabia Public Investment Fund, has signed a deal to buy a 40% stake in loss-making Selfridges for an undisclosed sum. It follows recent reports of the British department store chain seeing the value of its property portfolio, which includes its flagship Oxford Street store, fall by more than £600 million.

House of Fraser has also continued to close its stores, dropping from 59 in 2018 to now only 15. Although, its recent rebrand to ‘Frasers' is hoped to represent a new dawn for the retailer, having been dubbed its ‘next generation' department store. Managing director of luxury and premium, David Epstein, commented, ‘We had to think really hard about how we reimagine regional retail’ in light of the ‘troubles that traditional department stores have’.

These developments follow recent proposals to transform Oxford Street by pedestrianisation, and make the area substantially greener, clearer and safer, ‘to give the nation’s most famous high street a new lease of life’.

Luxury M&A moves: LVMH and Richemont

LVMH recently announced the sale of its interest in luxury fashion brand Off-White LLC to Bluestar Alliance, a brand management company in New York which owns and manages a portfolio that includes Tahari, Bebe, Kensie, English Laundry and Limited Too. The news follows Off-White’s first appearance at New York Fashion Week in September 2024. The terms of the sale have not been released, but Blue Star is known for buying struggling labels and licensing their names into ‘lower-price point categories’.

Off-White was founded by Virgil Abloh in 2013 with New Guards Group (now 100% owned by  Farfetch) as its exclusive licensor. Abloh remained creative director of Off-White until his passing in 2021 and, thereafter, the luxury streetwear label’s customer base dropped significantly under new creative head Ib Kamara. Off-White’s current licensing agreement with Farfetch’s New Guard Group is set to end in 2026.

Richemont, owner of Cartier and Montblanc, is similarly set to sell its online luxury multi-brand group, Yoox Net-a-Porter (YNAP) to online shopping platform MyTheresa. YNAP owns popular online stores Mr Porter, Net-a-Porter, Yoox and The Outnet. Richemont is selling YNAP with a cash position of £463 million in exchange for a 33% stake in MyTheresa. It follows Richemont’s previous plans to sell YNAP to Farfetch which fell through due to Farfetch’s financial struggles and subsequent acquisition by Coupang in 2023.

The deal is expected to complete between January and June 2025. Thereafter, MyTheresa intends to integrate YNAP into its luxury division to form one group with three storefronts: MyTheresa, Net-a-Porter, and Mr Porter. Yoox and The Outnet will come under the off-price division for online off-price luxury shopping.

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