Ashley Abandons Mulberry Bid: Handbag Maker's Financial Woes Prove Too Challenging

Mike Ashley, the billionaire owner of Frasers Group, has withdrawn his takeover bid for Mulberry, the British luxury handbag maker. The decision comes amidst Mulberry's recent financial struggles, including significant losses and a declining share price. Ashley's assessment of Mulberry's financial difficulties, coupled with the company's debt levels and cash flow issues, led him to abandon the bid.

Mulberry's financial losses and declining share price have eroded investor confidence in the company. The luxury brand has faced several challenges, including a 95% drop in share price from its all-time highs in May 2012. Despite a brief rally on the prospect of Frasers' takeover, Mulberry's shares have continued to struggle, falling by 2.4% in light trading on October 1, 2021.

Mulberry's financial woes are not limited to its share price. The company has also grappled with significant losses, which have raised concerns about its long-term viability. In its most recent financial year, Mulberry reported a pre-tax loss of £12.9 million, compared to a profit of £1.2 million in the previous year. The company's operating profit margin also declined to -14.3% from 5.5% in the same period.


Mulberry's debt levels and cash flow issues have further exacerbated its financial difficulties. The company's net debt increased to £22.5 million in the year to March 31, 2021, from £11.1 million in the previous year. Mulberry's cash flow from operations also turned negative, with a cash outflow of £1.4 million compared to an inflow of £6.8 million in the previous year.

Mulberry's "elevation strategy" to move upmarket has not yet translated into improved financial performance or shareholder value. The company's plans to raise capital from shareholders, including a proposed subscription from its majority shareholder Challice, have been met with skepticism. Frasers had offered to underwrite the subscription in its entirety, potentially on better terms for Mulberry. However, Mulberry's board rejected the bid, citing a lack of support from its majority shareholder and the undervaluation of the company.


The company's history of shareholder support and board decisions has also played a role in its financial trajectory and shareholder value. Mulberry's board has faced criticism for its handling of the company's financial difficulties, with some shareholders questioning the effectiveness of its strategic decisions. The company's reliance on a single majority shareholder, Challice, has also raised concerns about the lack of diversity in its shareholder base.

In conclusion, Mike Ashley's decision to abandon his takeover bid for Mulberry reflects the company's challenging financial situation. Mulberry's recent financial losses, declining share price, debt levels, and cash flow issues have eroded investor confidence and raised questions about the company's long-term viability. The company's "elevation strategy" and history of shareholder support have also contributed to its financial trajectory and shareholder value. As Mulberry continues to grapple with its financial difficulties, it remains to be seen whether the company can turn its fortunes around and regain the confidence of investors.