Frasers increases Mulberry stake to nearly 30%

By

Sandra Halliday

Published
Nov 4, 2020

​As Frasers Group continues to pivot more towards the upper end of the market, it has more than doubled its stake in luxury leather goods maker Mulberry.

Neither of the two companies announced that fact with any fanfare, but Mulberry filed a stock exchange notice that showed Frasers now owns 29.65% of the company and its voting rights. This is up sharply from its previous 12.54% holding.

It's tantalisingly close to the 30% marker that, under stock exchange rules, would force it to make a full offer for the business. There been no word on whether Frasers would intend to do this. But the fact that it has been careful to keep its holding under 30% and its history when it held just under 30% of Debenhams, suggests that it won't. Instead, it could be more likely to want to influence Mulberry and have a strong relationship with a brand that is a key name in department store leather goods sales.

Frasers had originally said, when it acquired the 12.54% stake, that the purchase was part of a “key strategic priority” to elevate its retail proposition and build “stronger relationships with premium third-party brands”.

It’s unclear exactly how much Frasers paid this time, although it would be less than it did when it first bought-in back in February. At the time, the shares were priced much higher, with the subsequent stock market crash sending them down to a current position of 151p each. That puts the entire market capitalisation of the company at a little over £90 million.

Mulberry a month ago reported revenue for the year to March 2020 falling to £149.3 million from £169.3 million. It also made an adjusted pre-tax loss of £14.2 million, which was much worse than the adjusted profit of £1 million a year earlier. But it said trading since the year end was ahead of expectations.

Frasers, which was formerly known as Sports Direct, has a long history of buying brands and has acquired labels including Jack Wills and House of Fraser. It also has a stake in Hugo Boss and is reportedly interested in buying Jaeger.

In recent years it has moved from its former focus on low prices at its Sports Direct chain via its 'elevation strategy', taking its wider business more upmarket. It has been opening more upscale Flannels stores and is also working on a new higher-end department store chain called Frasers.

While brand acquisitions have been a key part of its strategy, buying minority stakes in businesses hasn't always worked out well for it. It spent millions on building up an almost-30% stake in Debenhams, but lost out completely when that company went into administration.