House of Fraser: Brands will ‘think very hard’ about staying with department store, says Mulberry founder

'Reverberation around the designer fashion world is fairly enormous', says luxury bagmaker's founder

Mulberry’s founder has said luxury brands will “think very hard” about continuing to deal with House of Fraser after the department store chain’s collapse into administration and subsequent takeover by Mike Ashley’s Sports Direct.

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

House of Fraser’s administrators EY revealed last week suppliers, including a host of well-known designer brands, will not be paid millions of pounds worth of debts.

Mulberry’s share price plummeted as much as 30 per cent on Monday after the designer handbag maker announced it would take a £3m hit as a result of House of Fraser’s administration.

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

“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?’”

Luxury brands still “without doubt” need to have an offline presence despite a retail sales shift online, Mr Saul said.

“You’ve got to have clicks, bricks and mortar,” he said.

Mr Ashley vowed to turn around House of Fraser’s fortunes after his Sports Direct company bought the chain for £90m this month. The retail tycoon has said he will keep the majority of stores open and develop the brand into a “Harrod’s of the high street” by selling a greater number of high-end brands.

Mr Saul said Mulberry is in a relatively good position to deal with Brexit, because it manufactures its products in the UK and its sales are split around 50-50 between home and overseas markets.

The fall in the value of the pound has made goods manufactured in the UK cheaper for overseas buyers. On Wednesday, sterling fell to close to $1.29 against the dollar, compared to $1.47 on the eve of the June 2016 referendum.