House of Fraser to close more than half its UK stores: department store chain will shut 31 outlets, including London flagship
At least 11,000 jobs are at risk as House of Fraser prepares to close more than half its UK stores and Poundworld teeters on the brink of administration, in the latest blow to the high streets. House of Fraser unveiled a plan designed to stave off collapse which will mean the closure of 31 of its 59 department stores including its Oxford Street flagship in London and its shops in cities including Birmingham, Cardiff and Edinburgh.
The move by the 169-year-old company is part of a rescue plan that will also lead to House of Fraser moving out of its head offices in London and Glasgow and closing a distribution centre in Milton Keynes where more than 200 more jobs are under threat.
Up to 5,000 more jobs are at risk at the 355-store Poundworld chain which on Thursday gave notice that it intends to appoint administrators. The legal process provides court protection from creditors for 10 days while the company attempts to mount a last ditch rescue. However, even if a buyer comes forward at the 11th hour, they would be expected to close down a large part of the store estate. Poundworld’s private equity owner TPG Capital is understood to be unwilling to pump more cash into the business. TPG said a key reason for Poundworld’s problems was the Brexit blow to sterling, which pushed up the cost of imported goods.
The two chains’ difficulties come after a string of retailers and restaurant groups, including Mothercare, Carpetright, New Look, Prezzo and Jamie’s Italian, have announced plans to close hundreds of outlets putting more than 35,000 jobs on the block so far this year. DIY chain Homebase is also expected to close about 60 stores after a £1 rescue takeover by restructuring specialist Hilco which will be completed this month.
Alex Williamson, House of Fraser’s chief executive, said that without the proposed store closures the business was likely to collapse.
“A decision to close this number of stores is not done lightly. This is really grim,” Williamson said. “It is a highly emotional, highly regrettable situation that none of us either imagined or wanted to see happen, but there is simply no alternative.”
The 31 stores are set to close by early next year. The store chain also wants immediate rent reductions on the stores of 30% under a company voluntary arrangement (CVA), a form of insolvency that enables a business to rearrange deals with landlords. House of Fraser is also asking for rents to be cut by 25% at 10 other stores. The CVA requires the approval of three-quarters of creditors at a meeting on 22 June.
Outside the Oxford Street store which has been trading since 1879, Jeanne Bateman from Norwich said: “I’m a big high street shopper. I’m very sad to see so many big high street names closing down. I feel sorry for us the shopper, and very sorry for the people who work here.”
Her daughter Catherine Wilamowska agreed, but added that because she lives in a small village she does all her shopping online. Wilamowska’s habits reflect a changing world in which about a fifth of all UK retail spending has moved on to the internet. While online specialists such as Amazon, Boohoo and Asos continue to expand rapidly, traditional retailers are struggling to adapt as many are stuck in now unprofitable stores on long and expensive leases. Switching to selling online also requires heavy investment in IT and delivery networks at a time when cost prices have risen as a result in fall of the value of the pound. Many retailers are also facing big increases in business rates, together with higher labour costs as a result of the national minimum wage and apprenticeship levy. At the same time shoppers have reined back spending on clothing and household goods because of a squeeze on spare cash and a shift to renting rather than owning homes.
The House of Fraser chairman, Frank Slevin, said: “The retail industry is undergoing fundamental change and House of Fraser urgently needs to adapt to this fast-changing landscape in order to give it a future and allow it to thrive.”
In a presentation to investors, the company admitted it had made mistakes with its website and by cutting back on in-house womenswear brands, but it also blamed Brexit and the fall in the value of the pound for pushing up costs for retailers. House of Fraser said sales slumped by 7.4% at established stores in the year to the end of January and operating profits were down nearly 40% to £19.8m.
Dave Gill, national officer at the shopworkers union USDAW, said: “This is devastating news for House of Fraser employees. We are receiving calls from loyal and long-serving staff who are extremely worried, including those who work in brand concessions and are not directly employed by House of Fraser.”
He added that although House of Fraser does not recognise USDAW he had asked the retailer “to engage in urgent talks, so that we can challenge the business case, investigate what can be done to save jobs and represent our members’ best interests”.
The restructuring and closures are a condition of a deal that will give control of House of Fraser to the Chinese “C.banner” business, which also owns Hamleys.
C.banner is buying a 51% stake in the parent company of the ailing department store group for £140m, leaving the current owner, Nanjing Cenbest, part of China’s Sanpower conglomerate, with a minority stake.
(Source: Butler and Wood, 2018)
Quick guide: History of House of Fraser
House of Fraser traces its origins back to 1849, when Hugh Fraser and James Arthur opened a drapery shop on the corner of Argyle Street and Buchanan Street in the centre of Glasgow. By 1941, it had expanded into a number of shops in Scotland and became House of Fraser.
The 1950s marked a period of major expansion for House of Fraser. In 1953, still owned by the Fraser family, the group extended its geographic reach across Scotland and into north-east England and Carlisle with the purchase of the Binns chain, which had its origins in an early 19th century Sunderland drapery business. Harrods, the luxury London department store, and Dickins & Jones, became part of the House of Fraser group in the late 1950s.
Growth continued in the 1970s, with the addition of well-known names such as Rackhams, the Army & Navy stores and Dingles.
Change came in 1985 when the House of Fraser group was bought by the Al Fayed family for £615m and a new business strategy was announced, with plans to replace smaller branches with larger stores.
In 1994 House of Fraser was floated on the London Stock Exchange at a market value of £484m, with Harrods split off and kept under private ownership by Al Fayed.
A takeover bid from Scottish retail entrepreneur Tom Hunter was rejected in 2003 and some branches in Scotland were sold or closed.
However, two years later the group was in expansion mode again, buying 16 stores under the Jenners and Beatties brands became part of the group in 2005. Large new store openings followed in 2008 at locations including Belfast, Bristol and the Westfield shopping centre in west London.
In 2013, House of Fraser opened its first store overseas, in Abu Dhabi’s World Trade Center shopping mall. House of Fraser was bought by China’s Nanjing Xinjiekou Department Store Co – also known as Nanjing Cenbest – in 2014.
(Source: Monaghan, 2018)