August 20, 2018 / 7:01 AM / in 2 months

CORRECTED-UPDATE 1-Handbag maker Mulberry faces 3 mln stg hit from House of Fraser

(Corrects final paragraph to say shares down 46 pct this year not up)

LONDON, Aug 20 (Reuters) - British luxury bag maker Mulberry said on Monday it would take a 3 million pound ($3.8 million) hit from the administration of House of Fraser earlier this month, adding to the toll it faces from tough conditions in its home market.

Mulberry operates 21 concessions in House of Fraser, the department stores group that was bought from administrators by Sports Direct, the sportswear retailer controlled by tycoon Mike Ashley.

The company, whose bags sell for around 1,000 pounds, said the cost, which reflects debtor balances, fixed assets and potential restructuring, would be an exceptional item in its results for the six months to end-September.

It said the upheaval at House of Fraser was compounded by deteriorating trading conditions in Britain.

“Since the group reported in June 2018, the UK market has continued to remain challenging and sales in House of Fraser stores have been particularly affected,” it said.

“If these sales trends in the UK continue into the key trading period of the second half of the financial year, the group’s profit for the whole year will be materially reduced.”

Mulberry said trading in the rest of the world was broadly in line with its expectations and its cash position was strong, supporting its ambition to become a global luxury brand.

Sports Direct bought House of Fraser from its administrators for 90 million pounds after an earlier rescue plan, involving shutting 31 stores, was thwarted after Chinese group C.banner pulled out of a plan to invest.

Media reports have said Sports Direct is only planning to pay suppliers and concession operators for goods sold since it took over the group.

Shares in Mulberry, down 46 percent so far this year, closed Friday at 569 pence, valuing the business at 341 million pounds. (Reporting by Paul Sandle, editing by James Davey)

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