News started to turn sour for House of Fraser at the end of 2017, resulting in it’s sale in administration to Sports Direct for £90 million in August this year.
The House of Fraser website stopped trading immediately but Sports Direct owner, Mike Ashley, vowed to save 80 per cent of its stores (47 of it’s 59). In September, it agreed terms on 22 stores to keep short terms licenses, keeping around 3500 jobs. He had hoped to be able to negotiate more deals whereby he could pay no rent and only business rates on some locations and performance-based rents on others, but they were rejected by what Billionaire Ashley claims are ‘Greedy Landlords’.
On top of this, Ashley has said he believed that its previous management team “traded the business whilst it was insolvent for a long time”. Revenue came in at £70.1m in the 11 weeks that House of Fraser traded in the Sports Direct group during the half-year, and gross profit came in at £35.1m. But operating costs of £66.6m meant that underlying earnings were in negative territory at a loss of £31.5m.
Despite admitting there are challenging times ahead, Sports Direct remains optimistic. The company has said it has “spent the post acquisition period working with staff, suppliers, concessionaires and landlords to create a viable business which will be a core part of the elevation strategy of the group.”
The plan is to invest in the property to “further elevate and enhance this iconic department store”. We have already seen them buy the building of the elegant Glasgow store, saving 800 jobs. Ashley explained: “I genuinely believe we have acquired a fantastic opportunity and with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the ‘Harrods of the High Street’”
However, some believe that the damage has already been done and the House of Fraser brand image has been knocked too hard to reach the luxury heights of Harrods. YouGov BrandIndex data indicates that consumer perception of the brand has dropped significantly over the past year, in line with its financial problems. Around this time last year, the retailer’s Impression score (do you have a positive or negative impression of the brand) was around the +27 mark. However, by early July 2018, this score had decreased to +12.
But on the other side of the coin, more and more people are abandoning the ‘retail apocalypse’ forecast as shops continue to open on the high street. In fact, the other retail businesses within the Sports Direct portfolio had another successful year, reporting a 15.5% growth. Part of the success has been down to refreshing its store estate and selling more premium items from Nike, Adidas, Puma and Under Armour in an effort to compete with JD Sports. With plans to introduce more premium brands into House of Fraser, let’s see if they can extend the retail revival.
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