The shock-waves from the failure of House of Fraser, and subsequent pre-pack administration sale to Sports Direct, continue to be felt across the high street this morning, with a profit warning from Mulberry linked to the circa £2.4 million debt. Shares in Mulberry tumbled by 30% following the announcement.
Mulberry is not the largest industry creditor, with Ralph Lauren’s Polo UK brand reported to be owed £9.4 million, Kurt Geiger owed £4.8 million and XPO Logistics, which runs House of Fraser's distribution centre in Wellingborough reported to be owed £30.4 million.
Whilst customer failure is always a risk, particularly in the current economic climate, retail businesses can protect their position, through proper credit control and management systems and use of appropriate supply contract terms. Suppliers should consider reducing the period and/or amount of credit afforded to customers, taking security, such as a bank guarantee or letter of credit and/or obtaining credit insurance. A thorough review of standard terms of sales is also sensible, and the existence and consistent use of satisfactory terms is likely to be a precondition for credit insurance. Robust credit control, coupled with monitoring of key customers, can also assist, or, at the very least, provide advance warning of potential problems, and the opportunity to take protective action, before it becomes too late. Retention of title clauses, which are intended to allow a supplier to recover any goods that have not been paid for on insolvency, may be useful, although these clauses are subject to numerous practical limitations and should be viewed as an adjunct to robust credit control systems, rather than as a substitute for these.
Lindsey specialises in complex cross-border disputes, international and domestic arbitration, aviation, commercial and finance disputes. In addition to disputes work, Lindsey uses her expertise to assist clients with contractual drafting, interpretation, enforcement, termination, renegotiation and amendment, ongoing contract management and risk avoidance.
Leading fashion brands are revealed to be owed millions of pounds following the collapse of House of Fraser, which was bought out of administration by Sports Direct a week ago today. Ralph Lauren Polo’s UK business is owed £9.4m while footwear group Kurt Geiger is owed £4.8m. Among the others to have taken big hits are Phase Eight (£3.4m), Barbour (£3m), Mulberry (£2.4m), All Saints (£1.8m) and Giorgio Armani (£1.6m). Superdry and Aspinal of London are owed hundreds of thousands of pounds, according to a report by administrator EY.