The scale of the crisis at House of Fraser was laid bare today as figures released as part of a takeover showed the group swung to a massive £43.9million loss in 2017.
The pre-tax loss for 2017 compares to a profit of £1.5million the year before. C.Banner, which owns Hamleys and is buying the struggling department store in a £141m deal, blamed Brexit, terrorist attacks and increased online competition.
The figures also showed the retailer’s sales fell from £840.9million to £787.8million, a drop of 6.3 per cent.
House of Fraser´s future is on the line after it swung to a massive loss in 2017 (PA)
‘The Brexit referendum and the UK’s resultant decision to leave the European Union and the terrorist attack in London, combined with a rapidly evolving retail market, produced a period of uncertainty and volatility that resulted in a difficult trading environment for the whole retail industry in the UK,’ C.Banner said.
The losses come at a perilous time for House of Fraser and its Chinese owner Sanpower. In a desperate bid to save the business, Sanpower is selling a majority stake in the business while pursuing store closures.
C.Banner is taking a 51 per cent stake in the group by acquiring shares in Sanpower affiliate Nanjing Cenbest and subscribing to new shares as part of an investment in the business.
C.Banner is spending a total £141million to complete the acquisition, according to calculations based on a Hong Kong stock exchange release.
Despite the poor financial showing, C.Banner said House of Fraser would become ‘more stable’ when it completed its restructuring plan, the details of which will be released in June.
‘Nevertheless, the directors believe that as a leading department store chain in the UK, the target group will be able to take advantage of its well-known brand to capture growth potential,’ the firm said.
The retailer, which has 59 department stores, is struggling under the cost of its property portfolio.
It rents 4.4million square feet of retail space, and is stuck in long-term leases, with the average remaining lease life on its stores standing at 29 years.
C.Banner is hoping a tie-up with House of Fraser will create cost savings in its footwear and toys businesses, as well as in back-office functions such as IT.
House of Fraser and Hamleys could also negotiate better deals with suppliers, and widen their appeal with high-income customers, C.Banner said.
The Chinese retailer also said the acquisition could open up opportunities to buy other brands, and form strategic links with other retailers.