Upmarket fashion chain expected to be offloaded after Shepherdson takes the helm next year

Whistles is likely to be demerged from Baugur-owned Mosaic after Jane Shepherdson joins the womenswear business next year.

Shepherdson – formerly brand director of Arcadia flagship Topshop – is also expected to take an equity stake in Whistles as part of the deal, after being courted by the Icelandic investor to take the reins (Retail Week, last week).

Whistles would be the first brand among Mosaic’s eight-strong portfolio to be offloaded since the group began acquiring fashion businesses across the UK high street.

It is thought that Shepherdson’s former Arcadia colleague and close friend Karyn Fenn is likely to become involved in the venture. Fenn is leaving her role as joint managing director of Topshop in January.

The spinning-off of Whistles is likely to be formalised next year and may presage an eventual UK stock market listing for Mosaic, which has annualised sales of about£850 million.

With 34 standalone stores, 36 concessions and eight overseas outlets, it is understood that Whistles’ niche positioning makes it a less broad investment opportunity for Mosaic than some of its sister brands. Oasis, for instance, has more than 425 outlets and Karen Millen more than 165 globally.

One industry source said: “Whistles is very niche and specialist. It is not like a Karen Millen, which can be rolled out as a top-end international brand.”

Another said that Whistles’ narrow price architecture may have restricted its potential.

The exact timescale for a demerger is not known. One fashion industry source believed it may not happen immediately upon Shepherdson’s arrival. They thought she might benefit from working alongside Mosaic chief executive Derek Lovelock for a period in order to fully understand the business.“I’m not sure she would want to be separated off immediately, because Derek has a lot to offer,” they said.

Whistles is understood to have struggled in 2006/2007 against tough comparatives over the previous two years, although no figures have been lodged at Companies House for that period.

In the year to January 2006, the business – which has been owned by Baugur since 2004 – reported a turnover of£35.2 million and pre-tax profits of£5.6 million.

In 2006, Amanda Burrows was appointed brand director of Whistles, effectively heading the business. She has overseen the instalment of a new design team and the launch of its transactional web site last month.

Baugur and Mosaic declined to comment.