Mulberry will suffer a big blow this week as the crisis at House of Fraser demands another victim.
The luxury fashion company, which has concessions in 17 of the 59 department stores of House of Fraser, is hampered by uncertainty about the future of the chain.
Half-year results are expected to disappoint on Wednesday, mainly due to House of Fraser's acquisition of Sports Direct in August in a controversial pre-pack administrative deal.
House of Fraser owed £ 1 billion when it went bankrupt, with half of its debt from suppliers such as Mulberry and its top brands Ralph Lauren and Giorgio Armani. However, the deal between Sports Direct CEO Mike Ashley and administrators means he does not have to pay the debt.
Mulberry, which is famous for its expensive handbags, has been pocketed £ 2.3 million and has provided £ 3 million to cover the cost. Profits are expected to be "substantially reduced" this year if business does not recover in the crucial second half of the year.
Mulberry made a profit of £ 6.9m last year, with sales of £ 169.7m.
Richard Hyman, an independent retail expert, said, "The period in which Mulberry reports is significantly harder than a year ago, so you realize how fundamental the loss of that money will be.
"Companies that have made concessions in department stores really need to rethink their agreements and reassess the risk. We are in a retail market where everyone is under a lot of pressure and department stores are under more pressure than most. "
Mulberry's sales through the department store have already suffered after House of Fraser's website was closed after being acquired for nearly a month, and has since closed five of its franchises. Mulberry is said to have put further changes on hold until Sports Direct has made arrangements with House of Fraser landlords. Ashley wants to keep the majority of department stores open, but has so far secured only a handful for rental cuts.
However, it is assumed that the negotiations with the landlords could take up to one year, which would further put pressure on Mulberry's sales.
House of Fraser accounts for approximately 10 percent of Mulberry's sales – the fashion house is heavily dependent on UK spending, with less than 30 percent of its sales being made overseas. This contrasts with rival Burberry, whose international business accounts for much of its revenue.
Ashley has promised to turn House of Fraser into what he calls "Harrods of the High Street," but experts are skeptical of his ambitions. Hyman added, "I do not think anyone should rely on this plan because it was a speculative, dreamlike allusion. I can not see that ever happens. "
Mulberry declined to comment. Sports Direct did not respond to requests.