At the start of last month, it looked as though there was going to be a handbag-swinging duel between the two largest shareholders in the Mulberry Group (LON:MUL).
The Somerset-based company is the UK’s largest manufacturer of luxury leather goods.
There was a period, years ago, when the bags were totally ‘chic’ and could fetch well into four figures as the cognoscenti needed to be seen out ‘flashing’ their wares.
But times change and so do fashion trends.
Tightness of luxury spending in the last couple of years has not proved beneficial to the company, plunging it into operating losses.
It claimed to have 1,400 employees globally, with its head office based in London, as well as with two factories in Somerset, and five international offices situated in Paris, New York, Hong Kong, Tokyo, and Seoul.
The Two Billionaires
In one corner is the Singaporean property magnate 80-year-old Ong Beng Seng, who with his wife, 77-year-old Christina.
Together they hold, through their Challice Limited investment empire, major positions in the Four Seasons Hotels in Singapore, also with their Hard Rock Resorts interests there, additionally they promote the Singapore F1 Grand Prix.
Challice also holds a 56% equity stake in Mulberry.
In the other corner is the younger billionaire, Mike Ashley, boss of the Frasers Group (LON:FRAS) retail kingdom.
Ashley owns some 73% of the Frasers stock, while letting his daughter’s husband Michael Murray, as the CEO, run the shops and online fashion business.
Frasers holds 37% of the Mulberry shares.
Ashley, it has been declared, is not at all happy with the current demise of the handbag outfit – in fact he has tried several times and several ways to get on to its Board and help its recovery.
He was even prepared to bid for the company but Ong Beng Seng, it is said, denied any constructive talks as part of such a process – with Ashley backing away from that avenue.
Interim Results
On Tuesday of this week, 19th November, Mulberry reported its unaudited results for the 26 weeks to 28th September.
They were appalling, showing revenues down 19% to £56.1m (£69.7m), adding to the overall underlying pre-tax loss of £15.3m (£12.3m).
The recently appointed CEO Andrea Baldo stated that:
"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.
Mulberry is an iconic brand. It stands out for its rich heritage and craftsmanship - qualities that our customers recognise and value deeply.
Combined with our unique position in the market, offering responsible luxury products of unmatched quality and longevity, crafted in our Somerset factories, Mulberry truly is one of a kind.
We are now working on initiatives to renew the brand's relevance, initially for UK consumers and then for our international audience.
In response to current market conditions, we have taken decisive steps to streamline operations, improve margins, reduce working capital, and strengthen our cash position.
This has also meant reviewing our internal team structure to ensure we become a leaner, more agile organisation.
Additionally, we've made strategic adjustments to our product, pricing, and distribution strategies, and we've begun discussions with luxury wholesale partners to ensure we are present wherever our customers shop."
Baldo went on to clearly define that:
“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.
However, with the teams' efforts on cost-cutting, a strengthened balance sheet, a renewed brand-first approach and a refreshed business strategy-details of which I'll share in due course.
I am confident we are making the right moves to bring Mulberry back to profitability."
Elsewhere in the accompanying statement the company notes that trading for the full financial year is expected to be weighted towards the second half year, given the imminent and important festive trading period.
Will The Billionaires Wait Patiently?
As Baldo starts to cut a swathe through the operations and accompanying costings within the Mulberry Group – the real question is just how the two billionaires will play their hands.
Will they get into another tussle, or will they get into a ‘refinancing huddle’ to help out the cash-strapped business, to the benefit of each other?
I would like to guess that the two will end up having a very good ‘talk-out’ to create remedial actions alongside Baldo’s measures – such that both will see the group flourish again for its shareholders.
The group’s shares, which in the middle of last month touched 132p, have subsequently fallen back to the current 100p, at which the business is valued at £70.6m.
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