Luxury handbag maker Mulberry Group PLC (LON:MUL) will take a £3mln hit from the administration of department store chain House of Fraser earlier this year.
In reaction, shares tumbled 17.4% to 470p in morning trading.
Mulberry, which operates 21 concessions in House of Fraser, said the exceptional charge will be reflected in its results for the six months to September 30.
Mike Ashley’s Sports Direct earlier this month said it would buy House of Fraser from administrators for £90mln in cash.
Mulberry warned that its profit for the year will be “materially reduced” if weak sales trends in the UK retail market continue.
“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,” the company said.
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More positively, trading in the rest of the world continues to develop broadly in line with management's expectations.
The group said it is in a “strong cash position and continues to follow its strategy to develop Mulberry into a global luxury brand”.
Artjom Hatsaturjants, research analyst at Accendo Markets, said: "Exclusive luxury brands like Mulberry are having difficulties adapting to the new trading environment because they rely so heavily on the personal experience they offer to their customers.
"While the company does sell online, Mulberry retail strategy depends on the physical journey of shopping in upmarket retail concessions, which means that its fortunes can rise (and fall) with the likes of House of Fraser."