- Various restructuring proposals being considered, which could result in closures
- House of Fraser currently has 59 UK stores and employs thousands of people
House of Fraser has called in accounting giant KPMG to look into possible restructuring plans, which could result in store closures and job losses.
After suffering sluggish sales over Christmas, one of the options KPMG will be mulling over is the possibility of the retailer entering into a Company Voluntary Arrangement.
If a CVA goes ahead, it is possible that a number of House of Fraser’s 59 UK stores could be closed. The group employs 6,000 staff and has 11,500 concession workers.
Getting advice: House of Fraser has called in accounting giant KPMG to look into possible restructuring plans
Up until now, Chinese-owned House of Fraser had been in informal talks with its landlords in a bid to get its soaring rental costs reduced.
In a brief statement, a spokesman for House of Fraser said: ‘House of Fraser can confirm that we have appointed KPMG and are working closely with them to look at options that best support our transformation programme.’
Sanpower, which is the Chinese group that owns House of Fraser, has been pumping millions of pounds into the retailer to keep it on an even keel. Over £30million has been churned into the company since September.
In January, House of Fraser reported a 2.9 per cent fall in sales in the six weeks to 23 December compared with a year earlier. Online sales fell by 7.5 per cent over the crucial Christmas period.
What is a company voluntary arrangement?
In simple terms, a CVA is an insolvency procedure which allows a company with sizable debts to negotiate with all its creditors to agree the repayment of all or part of those debts.
In April 2014, Mike Ashley’s group, Sports Direct International, snapped up an 11 per cent stake in House of Fraser. Sports Direct refused to give up its stake in the retailer once it was sold to China’s Sanpower conglomerate.
Amid torrent trading conditions across Britain’s high-streets, a string of retailers have entered into CVAs this year, including New Look and restaurant chain Prezzo.
Other high-street restaurant chains including Byron and Jamie’s Italian have also announced plans to shut stores as part of restructuring plans.
On Thursday morning, House of Fraser’s rival department store, Debenhams, reported an 84.6 per cent drop in pre-tax profits during the 26 weeks to March 2018, to £13.5million. This is down from £87.8million at the same point a year earlier.
Debenhams said the ‘challenging’ UK market saw like-for-like sales in the six month period drop 2.2 per cent, with the ‘Beast from the East’ forcing 100 stores to close and contributing around 1 per cent of the sales drop.
Options: If a CVA goes ahead, it is possible that a number of House of Fraser’s 59 UK stores could be closed, resulting in scores of jobs being lost