House of Fraser apologises to shoppers after cancelling all online orders

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House of Fraser collapsed owing creditors such as Armani, Diesel and Prada a total of £484 million, documents revealed today.

The chain was bought out of administration by Mike Ashley’s Sports Direct last week, but the retail tycoon is not paying suppliers money owed before his rescue.

According to a report from department store House of Fraser’s administrators at Ernst & Young (EY), trade creditors are owed millions between them. 

House of Fraser's unsecured creditors are estimated to be owed about £484million

House of Fraser's unsecured creditors are estimated to be owed about £484million

House of Fraser’s unsecured creditors are estimated to be owed about £484million

Designer brands such as Versace, Gucci and Prada amongst the biggest names left out of pocket.

EY has estimated that House of Fraser’s unsecured creditors, aside from its employees, which will be transferred to Sports Direct, are owed about £484million.

However, this figure could rise as more creditors send in claims to EY.

A dispute with third-party distributor XPO Logistics over non-payment has led to the closure of House of Fraser’s warehouse and the cancelling of online orders. 

The beleaguered chain's website has been taken offline amid complaints from customers

The beleaguered chain's website has been taken offline amid complaints from customers

The beleaguered chain’s website has been taken offline amid complaints from customers

According to the EY report, XPO is owed more than £30 million.

It also shows House of Fraser was knocked by a 7.7 per cent decline in sales over the first 13 weeks of the year, and gross profit had fallen by £14.6million.

The troubled department store made an operating loss of £31.4million, which EY said was largely due to the drop in sales.

Outlining the company’s decline, EY said House of Fraser took several steps to try to address the issues, securing a £50million injection of capital in March.

‘However, these actions were unable to address the downturn in trading performance and the directors concluded that the business had reached a stage where it was no longer able to continue to meet its ongoing costs in its current format,’ the report said. 

The chain's mobile website is also down

The chain's mobile website is also down

The chain’s mobile website is also down

Mr Ashley purchased House of Fraser for £90 million in a so-called pre-packaged administration, which allows him to drop certain liabilities through the insolvency process.

House of Fraser’s creditors also include its PR firm, Newgate Communications, which is owed £33,512, and Royal Mail, which is owed £135,465.

The new documents were revealed as House of Fraser apologised to customers today after cancelling all orders placed online.

The beleaguered retailer said it had wiped all orders that had not already been sent to customers and would be issuing refunds.

The move comes after the chain’s website was taken offline amid complaints from customers about delayed deliveries since the company was bought by Sports Direct.

‘All customers affected will receive an email about the cancellation and refund in the next couple of days.

‘Please accept our apologies for any inconvenience caused and thank you from everyone at House of Fraser for your patience at this time.’

The announcement was met with dismay by some customers who had placed orders online, some several days ago.

One said on Twitter: ‘Absolutely disgraceful. Ordered a £90 purse last Thursday. Yes a week ago for my daughters birthday. Not 1 email concerning delivery or info and now order cancelled and you say email in a few days!!! Get my money back ASAP’

Another said they had been told by email that items from their husband’s suit would not be delivered.

They tweeted: ‘This was for our holidays! I don’t have time to go back to Edinburgh with the trousers which are now totally useless! What do you suggest I do!’

A message posted on the retailer’s website said it was ‘working hard to make some improvements’, telling customers it will be ‘back up and running as soon as possible’.

There have been complaints from House of Fraser's customers about delayed deliveries since the company was bought by Sports Direct, owned by Mike Ashley (pictured)

There have been complaints from House of Fraser's customers about delayed deliveries since the company was bought by Sports Direct, owned by Mike Ashley (pictured)

There have been complaints from House of Fraser’s customers about delayed deliveries since the company was bought by Sports Direct, owned by Mike Ashley (pictured)

The Times reported that employees at a key warehouse supplying products to House of Fraser stores and online shoppers had downed tools in a wrangle over delivery payment terms with Sports Direct.

The paper said it understood that workers at the chain’s distribution centre in Wellingborough had been told by XPO Logistics, which operates the site, to stop accepting goods and processing deliveries, leading to product shortages in some House of Fraser outlets.

Mr Ashley said his ambition was to turn the department store into the ‘Harrods of the high street’ after buying the firm from administrators earlier this month.

The £90million rescue bid saw Sports Direct acquire all 59 House of Fraser stores, the brand and all of the retailer’s stock.

COFFEE SHOP CHAIN BENEFITS FROM ASHLEY TAKEOVER 

A coffee shop company has emerged as being helped by Mike Ashley’s takeover of House of Fraser.

Massarella Catering Group Ltd, a family business based in South Yorkshire operates 120 Coffee Shops and Restaurants within the retail sector, 47 of which are situated within House of Fraser stores.

Mark Massarella, Managing Director said today:‘Following his acquisition of House of Fraser last Friday I met with Mike Ashley and his team from Sports Direct to clarify the implications. I can report that we had a positive meeting and have reached an agreement to continue trading all of our restaurants within the companies’ stores.

‘Although this does not overcome all the difficulties that we have sustained through the administration of House of Fraser, I am hopeful that we will be able to retain more of our business than we had originally expected under the previous CVA proposal. 

‘We have agreed terms with Sports Direct which now stabilises the company’s situation and gives us the opportunity to continue trading all the Coffee Shops within the stores.

‘Massarella have a strong, historic relationship with House of Fraser.

‘I was impressed with Mike Ashley’s aspirations for House of Fraser, coupled with the level of funds that he is proposing to invest which should breathe new life into many of the stores.’

‘We are delighted to have the opportunity to work closely with Sports Direct to develop the hospitality within House of Fraser going forward.’

 

 

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