House of Fraser - Hands up, who saw it coming?
It’s official. After months of speculation, yesterday (8th June), House of Fraser confirmed its rescue plan, and boy! It is dramatic...
The plan includes a raft of store closures - 31 across the UK, 53% of its estate - including its flagship on Oxford Street, one of the prime real estate spots in the whole of the UK in terms of footfall, one would have thought... The store closures will see the loss of 2,000 roles in House of Fraser stores, and another 4,000 roles for the brand or in concessions.
The plan also includes a Company Voluntary Agreement (CVA), to reduce rents by 25% on 10 of the stores it’s keeping open, and a 70% discount on the rent of the 31 stores due to close, in around 7 months’ time. All of this from a company which reported a £17.5m profit last year!
Crucially, in a vote on the 22nd of June, it will need 75% of its creditors to back the plan. Failure to secure this vote can only end one way: administration.
The warning signs were there – did you see them?
Between December 2017 and March 2018, the monthly credit guide recommended by Graydon was slashed from £1.125 million to just £125,000 (a reduction of 89%!), before being ‘X-rated’ once the news was officially confirmed.
What does the future hold?
The challenge for House of Fraser, even with a reduced and more cost-efficient estate, is to remain relevant and an attractive prospect on the high street and in shopping centres.
This is no mean feat as many of the headwinds challenging House of Fraser are unlikely to go away, even high street stalwarts such as Next, Marks and Spencer and Debenhams have struggled, with profit warnings from Next and Debenhams and Marks and Spencer’s announcement of over 100 store closures over the next four years.
As Frank Slevin, House of Fraser’s own chairman, describes: the retail industry is ‘undergoing fundamental change’.
Between increasing business rates and rents, a rise in the National Living Wage, and the challenge brought by online-only retailers - Boohoo.com, Asos and Missguided - are just a few that are now house-hold names, it is a tough ask. The in-store customer experience and the product offering must be spot on.
The wolf of a harsh retail environment has huffed and puffed, and it might be about to blow down the House of Fraser.
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