House of Fraser will close 31 stores putting 6,000 jobs at risk


House of Fraser has announced 6,000 of its employees are at risk of losing their jobs as it plans to close more than half of its stores in a bid to save the company.

The retailer today announced plans to shut 31 of its 59 stores across the UK and Ireland as part of a rescue deal which would allow it to keep some of its smaller branches trading.

Staff at the brand’s flagship Oxford Street store only found out their jobs were at risk this morning, after the news made headlines across the world.  

The announcement has left employees and customers ‘devastated’ with one shopper commenting ‘the days of department stores are gone’.

Embattled department store chain House of Fraser is closing more than half of its stores in a bid to save the company - putting 6,000 jobs at risk (Pictured: The flagship store on London's Oxford Street which is set to close)

Embattled department store chain House of Fraser is closing more than half of its stores in a bid to save the company – putting 6,000 jobs at risk (Pictured: The flagship store on London’s Oxford Street which is set to close)

Today’s news comes as the budget retailer Poundworld revealed it is to appoint administrators, putting around 5,300 jobs at risk.

Britain’s high street is facing a crisis as shoppers move to online. Up to 10,000 stores are estimated to close in the country by the end of the year.

House of Fraser stores affected by the plans include its flagship on London’s Oxford Street and branches in Edinburgh, Birmingham and Milton Keynes – while Wales will be left with no remaining stores as both the Cardiff and Cwmbran branches are primed for closure.

The company was bought by Chinese firm Sanpower for £480million in 2014.

The firm is understood to have agreed a restructuring plan which will see all but its most modern stores, and those in large shopping centres, close.

This map shows the House of Fraser stores set to close (in red) and remaining open (green)

Closing: The Leeds branch of the retailer - a prominent store in the city's centre - will shut its doors later this year 

Closing: The Leeds branch of the retailer – a prominent store in the city’s centre – will shut its doors later this year 

Closure of House of Fraser marks end of era for the British high street

Pictured: Businessman Sir Hugh Fraser

Pictured: Businessman Sir Hugh Fraser

Department store chain House of Fraser is shutting more than half of its stores as the carnage on the high street shows no sign of slowing down.

The retailer has a history stretching back almost 170 years and is one of the country’s best-known fashion brands.

The retail giant began with a single drapery shop, opened in Glasgow by Hugh Fraser and James Arthur in 1849.

It grew steadily, becoming House of Fraser in 1941, then took hold as a national chain after the Second World War.

Over the years, the business has acquired numerous companies, including Harrods, which is now privately owned.

House of Fraser has been owned by Egyptian-born billionaire Mohamed Al-Fayed and before that by the Fraser family, from which it takes its name.

It was bought by Chinese conglomerate Sanpower Group for £480 million in 2014.

Pictured: The late Alfred Spence, former director of House of Fraser and managing director of Harrods discussing price ranges in the 1960s 

Pictured: The late Alfred Spence, former director of House of Fraser and managing director of Harrods discussing price ranges in the 1960s 

Like other retailers, House of Fraser has struggled over the past few years as stiff competition from online rivals and the slump in consumer confidence have knocked the firm.

It forced Sanpower to seek outside help in the form of a stake sale to Hamley’s owner C.banner.

Before today’s announcement, the group had 59 locations across the UK and Ireland, and employed around 5,000 people directly and 12,500 concession staff.

Jobs will be cut significantly, with closures set to affect up to 2,000 staff and a further 4,000 concession workers.

House of Fraser said the planned closures, which include its flagship Oxford Street store, come as part of a company voluntary arrangement (CVA) – a controversial insolvency procedure in vogue among struggling retailers.

The retailer is also asking for a 25 per cent rent cut on 10 of the stores that it plans to keep open.

Landlords, who must vote through the plan, have already expressed serious concerns about the proposals and met on Tuesday to discuss how to respond to House of Fraser. 

At least 75 per cent of creditor approval is needed, with the vote set to take place on June 22.

If the CVA is approved by landlords, it will affect up to 2,000 House of Fraser staff and a further 4,000 across brands and concessions.

House of Fraser said the shops earmarked for closure would remain open until early 2019.

Alex Williamson (pictured left), chief executive of House of Fraser and Frank Slevin (right) chairman of House of Fraser

Alex Williamson (pictured left), chief executive of House of Fraser and Frank Slevin (right) chairman of House of Fraser

The group said it also plans to relocate its Baker Street head office and the Granite House office in Glasgow to help slash costs and ‘secure House of Fraser’s future’.   

House of Fraser stressed that the group will continue to trade ‘as normal’ online and through stores ahead of the CVA vote and throughout the proposal.

Eager shoppers queued outside one House of Fraser shop on Thursday morning waiting for the store to open – while staff inside were being told they no longer had jobs.

The store in Birkenhead, open for six decades, was one of those to be closed – another blow for the shipbuilding town on the Mersey.

A notice in the window told customers that ‘due to unforeseen circumstances’ the shop would be opening at 10.30am and apologised for any inconvenience.

As staff inside were being told of the closure, a group of mainly elderly shoppers outside discussed the news.

Changes: A pedestrian pictured passing by the Middlesbrough House of Fraser store which is also earmarked for closure 

Changes: A pedestrian pictured passing by the Middlesbrough House of Fraser store which is also earmarked for closure 

High street in crisis: Experts forecast some 10,000 shops in the UK will close by the end of 2017

High street in crisis: Experts forecast some 10,000 shops in the UK will close by the end of 2017

Doreen Gibson, 81, from Greasby, Wirral, said: ‘We’ve been coming here every two weeks for 25 years. We meet our friends and have a coffee in the restaurant and a bit of shopping.

‘It is devastating. They are all shopping online now, all the younger ones, that’s what’s ruining it all. Some people still like to go and see what they are going to buy.

‘Honestly, it’s really, really terrible news.’

Gaynor Smith, 70, from Birkenhead, said: ‘It’s terrible, they are all closing down.

‘The girls in there, we know them, they have got mortgages, they will be devastated.

‘There’s nothing left in this town, we will have to go to Liverpool to shop.

‘It’s getting like no one will be able to go out to shop and talk to each other any more. You can do it online and there’s no shops left.’

Dannielle Golding, from Oxton, Wirral, shopping with her son, Elliot, two, said: ‘I think the days of department stores are gone now.

‘It’s very sad for the staff. Just in Birkenhead alone there’s lots closing, we’ve had Marks & Spencer close recently, Dorothy Perkins and now this, loads have gone.’

After the shop opened, shopper Angela Sharkey, from Birkenhead, emerged to say she had spoken to staff inside.

‘The lady inside who I spoke to said, ‘We only found out this morning. We are all disgusted’,’ Mrs Sharkey said.

She had been shopping there for 60 years.

Mrs Sharkey said: ‘Since a little girl I’ve been coming here, we would wander in and out the shops.

‘I think it’s disgusting. It feels as if the whole town is closing, going to wrack and ruin.

‘They don’t think of the people who come out to shop, only those who go on the internet.

‘There are no shops to go to any more, only pound shops and charity shops.’ 

Patrick O’ Brien UK Research Director at GlobalData Retail tweeted that rival Marks and Spencer is set to gain the most from the closures. 

In piece on Verdict reports that ‘shoppers who buy clothes from House of Fraser are more likely to also shop at M&S for clothes than any other retailer and so has the best opportunity to gain market share, followed by Debenhams.’   

The announcement comes as Britain’s high street faces a crisis amid an onslaught from online rivals.

This Is Money reports it is predicted more than 10,000 shops will disappear this year – the most in a decade.

Toys R Us and Maplin have collapsed into administration and Marks & Spencer, Mothercare, Carpetright and New Look are all closing shops. Analysts warned the crisis is likely to continue.  

Twitter users have flocked to social media to discuss the news this morning - with some expressing sadness and others lamenting the struggle the British high street currently faces

Twitter users have flocked to social media to discuss the news this morning – with some expressing sadness and others lamenting the struggle the British high street currently faces

Alex Williamson, chief executive of House of Fraser, said: ‘Today’s announcement is one of the most important in this company’s 169-year history.

‘We, as a management team, have a responsibility to take necessary steps to ensure House of Fraser’s survival, which is why we are making these proposals.

‘We are fully committed to supporting those personally affected by the proposals.’

Frank Slevin, chairman of House of Fraser, said: ‘The retail industry is undergoing fundamental change and House of Fraser urgently needs to adapt to this fast-changing landscape in order to give it a future and allow it to thrive.

‘Our legacy store estate has created an unsustainable cost base, which without restructuring, presents an existential threat to the business.

HOUSE OF FRASER’S FINANCIAL HISTORY

2014: Sanpower group, owned by Chinese industrialist Yuan Yafei, buys House of Fraser. The new owner announces big plans to grow the business and expand into China by investing £75million in the business.

2015: House of Fraser posts its fifth straight year of statutory losses as the group suffers hefty charges related to its £300million refinancing, which it had used to fund store refurbishment and improve its buy-and-collect service.

2016: Despite Sanpower’s big expansion plans, by December of this year only one outlet has opened, in Chinese city of Nanjing.

September 2017: House of Fraser gets its first cash injection from its Chinese owner, who finally pumps in £25million.

May 2017: Chief executive Alex Williamson is brought in. He launches a turnaround effort to overhaul House of Fraser’s product range and stores while trimming costs. He says he wants to cut property costs by 30 per cent within five to ten years.

January 2018: The struggling department store says it will close failing stores or reduce the size of others after recording disappointing Christmas sales.

March 2018: Sanpower announces plans to offload 51 per cent of its 89 per cent stake to a mystery Chinese leisure firm called Wuji Wenhua. Meanwhile another suitor appears – Chinese company Fullshare, controlled by billionaire Ji Changqun. However, the company issues a profit warning a fortnight before the deal is expected to be finalised.

April 2018: Accounting giant KPMG is called in to look into possible restructuring plans.

May 2018: The firm draws up proposals for a company voluntary arrangement – an insolvency process that could see it close up to 30 of its 59 stores and negotiate dramatic rent cuts on others. That is the condition to access £70million funding pledged by a second Chinese firm, C.banner, which owns the Hamleys toy shop in London. The Chinese owner of Hamleys, C. Banner, has made access to the funds conditional on a restructuring deal being done.

7 June 2018: The department store goes ahead with the CVA, which will result in the closure of 31 of its 59 stores across the UK and Ireland.

‘So whilst closing stores is a very difficult decision, especially given the length of relationship House of Fraser has with all its locations, there should be no doubt that it is absolutely necessary if we are to continue to trade and be competitive.’ 

House of Fraser was founded by Hugh Fraser and James Arthur in Glasgow in 1849 as a drapery shop called Arthur and Fraser. By 1941, what started as a small local shop had acquired a number of businesses in Scotland and became known as House of Fraser Ltd. 

The company continued to expand and acquired a number of businesses, including luxury department store Harrods in 1957 and stores Dickins & Jones and Rackhams & Cavendish House in 1971.

In 1973 the company considered a merger with Boots, but the move was rejected by the Government.

 In 1985 it was bought out by the Fayeds brothers, the owners of Harrods, for £615million who then floated the company on the London stock exchange in 1994 for £484million and began a major refurbishment of the department store. 

House of Fraser launched its first own womenswear, menswear and homeware collections – Linea and Platman – between 1997 and 2000 under the leadership of its new chief executive John Coleman.

In 2003 it received a takeover offer by Scottish entrepreneur Sir Tom Hunter that however was rejected. Meanwhile, the department store closed down or sold off several branches in Scotland.

It launched online in 2007 and opened its first international store in 2013 in Abu Dhabi.

House of Fraser’s current owner – the Chinese conglomerate Sanpower Group – bought 89 per cent of the department store in September 2014 for £480million.

Sanpower group is in turn controlled by Chinese industrialist Yuan Yafei, whose wealth is estimated at £1.4billion. Sports Direct founder Mike Ashley, also owner of Newcastle FC, holds the remaining 11 per cent.  

Like other retailers, House of Fraser has struggled over the past few years as stiff competition from online rivals and the slump in consumer confidence have knocked the firm.

It forced Sanpower to seek outside help in the form of a stake sale to Hamley’s owner C.banner.

Before today’s announcement, the group had 59 locations across the UK and Ireland, and employed around 5,000 people directly and 12,500 concession staff. 

John Pal, retail expert at Alliance Manchester Business School, said: ‘News that House of Fraser is to close stores comes as no surprise as many retailers grapple with stagnating sales and increasing running costs.

‘House of Fraser tried to use a CVA to wriggle out of its property commitments, which is just the latest in a line of retailers to use this tactic. However, other retailers who are in better shape are not resorting to the use of CVAs when they would ideally like to rid themselves of underperforming stores.

‘UK high street fashion retailers are facing a perfect storm in terms of increasing business rates, an over-capacity of space, particularly in high cost locations, and the move to online purchasing. If major retailers such as House of Fraser can walk away from their liabilities it also could have repercussions for those centres in terms of increasing vacancy rates.’

The group said it also plans to relocate its Baker Street head office (pictured) and the Granite House office in Glasgow to help slash costs and 'secure House of Fraser's future'

The group said it also plans to relocate its Baker Street head office (pictured) and the Granite House office in Glasgow to help slash costs and ‘secure House of Fraser’s future’

Andy Brian, partner and head of retail at Gordons law firm, said: ‘It’s no coincidence that many of the more ‘traditional’ high street names are struggling. 

‘These are incredibly challenging times for retailers with pressures such as rising import prices, business rates and the costs of trying to keep up with online competitors all combining to squeeze margins, particularly for the likes of House of Fraser (and recently BHS and Debenhams) which have historically relied heavily on their bricks and mortar presence. 

‘Only the most innovative retailers will thrive in this climate. That means finding bold new ways to combine an effective online offering with a compelling in-store experience, and then being brave enough to implement it, fast. 

‘It remains to be seen whether this is the first step towards House of Fraser doing just that.’

Which House of Fraser stores will close and which will remain open?

 CLOSING

Altrincham, Aylesbury, Birkenhead, Birmingham, Bournemouth, Camberley, Cardiff, Carlisle, Chichester, Cirencester, Cwmbran, Darlington, Doncaster, Edinburgh Frasers, Epsom, Grimsby, High Wycombe, Hull, Leamington Spa, Lincoln, London Oxford Street, London King William Street, Middlesbrough, Milton Keynes, Plymouth, Shrewsbury, Skipton, Swindon, Telford, Wolverhampton, Worcester.

REMAINING OPEN

Gateshead Metro Centre, Huddersfield, Leeds, Manchester, Nottingham, Sheffield Meadowhall, Sutton Coldfield,  Bluewater,  Croydon, London Victoria, London Westfield, Richmond, West Thurrock Lakeside, Bath, Bristol, Cheltenham,  Cirencester, Exeter, Guildford,  Maidstone, Norwich, Reading The Oracle, Rushden Lakes, Edinburgh (Jenners), Glasgow, Loch Lomond Shores (Jenners), Belfast

Two further shops are excluded from the proposals as they are separate legal entities: Dublin Dundrum and Solihull (Beatties) 

BRITAIN’S AILING HIGH STREET: RETAILERS STRUGGLING TO COMPETE WITH ONLINE RIVALS 

House of Fraser’s move to shut down more than half of its stores comes amid turmoil on the high street, with multiple retailers falling into administration or announcing restructuring plans since the start of the year.

Experts say that a combination of online competitors, increasing business rates and rising import prices are leaving high street giants who have traditionally been seen as untouchable struggling to survive.  

Here  MailOnline looks at the changes high street retailers have recently made:

Marks & Spencer: Late last month, the high street stalwart reported a 62.1% fall in pre-tax profit to £66.8 million in the year to March 31 as it was dragged down by £321.1 million in costs linked to store closures.

The results came a day after M&S said it will shut more than 100 outlets by 2022 as it accelerates a transformation programme that will see thousands of jobs put at risk.

Toys R Us: The toy chain went into administration on the last day of February after failing to find a third-party buyer. In February, HMRC sought to recover £15 million in unpaid VAT and this finally tipped the company into administration.

Maplin: One of the UK’s biggest electronics retailers collapsed into administration on the same day as Toys R Us after talks with buyers failed to secure a sale. The business faced the slump in the pound after the Brexit vote, weak consumer confidence and a withdrawal of credit insurance.

The Edinburgh branch of House of Fraser which is one of those expected to close

The Edinburgh branch of House of Fraser which is one of those expected to close

Conviviality Retailing: The major drinks and off-licence supplier that owns Wine Rack and Bargain Booze went into administration in early April. The company had grown too quickly by merger, there were a series of profit warnings and a £30 million tax bill for which Conviviality was forced to ask for extra funds from investors – who refused.

Warren Evans: The bed, mattress and furniture retailers in London and the South East went into administration one week after putting itself up for sale. The retailer, known for its ethical stance, had been losing money for some time under the pressure of rising costs and shrinking customer spending.

Calvetron: The owner of Jacques Vert, Windsmoor, Dash and Eastex fashion brands that ran about 300 UK concessions in stores including Debenhams and House of Fraser, went into administration at the start of May. Bosses said inflation and wage freezes had been a driving force behind decreased spending.

Juice Corporation: The firm behind fashion brand Joe Bloggs and the retailer that designed the wedding dress for Diana, Princess of Wales, collapsed into administration in January. Although the group made profits, it had failed to make inroads into the fashion market.

Mothercare: The ailing baby goods and maternity retailer has proposed to close 50 stores as part of a planned turnaround for the company. It said losses were driven by the costs of 17 store closures last year, onerous leases and a head office restructure which resulted in 190 job cuts.

Carpetright: The embattled flooring firm is embarking on a store closure programme and has begun efforts to raise £60 million in emergency funding as it pushes through a restructuring after announcing it was expecting to book a full-year underlying pre-tax loss of between £7 million and £9 million.

Carluccio’s: The upmarket deli chain has unveiled a restructuring plan that will likely lead to 34 restaurant closures as it cited a combination of a gradual decline in consumer spending and increasing competition, coupled with the rising costs of labour, raw materials, rent and business rates.

Other restaurants that have undertaken company voluntary arrangements so far this year include Byron, Prezzo and Jamie’s Italian.

New Look: The clothing chain announced earlier this year that it would close 60 UK stores and cut 1,000 jobs as part of a financial restructuring.

Poundworld: The discount chain said it was planning to close about 100 stores, putting about 1,500 jobs at risk, as it struggled to absorb rising costs. 

Poundworld puts 5,300 jobs at risk as it announces intention to call in administrators 

Poundworld is poised to announce its intention to appoint administrators, putting around 5,300 jobs at risk, reports claim.

It is understood that the discount chain is low on cash and is filing the notice because it will give the business protection from its creditors for up to two weeks.

Today’s announcement comes as Britain’s high street faces a crisis amid an onslaught from online rivals.

Poundworld is poised to announce its intention to appoint administrators, putting around 5,300 jobs at risk, reports claim

Poundworld is poised to announce its intention to appoint administrators, putting around 5,300 jobs at risk, reports claim

Sources told the Press Association that the planned notice will give Poundworld time to structure a pre-pack administration deal with private equity firm R Capital, former owner of Little Chef.

The administration will be handled by Poundworld’s advisers Deloitte. 

Yesterday it was reported that the founder of Poundworld was putting together a rescue package to prevent its collapse after a potential buyer walked away from rescue talks. 

Chris Edwards built the chain from a market stall and is understood to be mulling a bid to buy it back from private equity owner TPG Capital.

Chris Edwards, pictured, built the chain from a market stall and is understood to be mulling a bid to buy it back from private equity owner TPG Capital

Chris Edwards, pictured, built the chain from a market stall and is understood to be mulling a bid to buy it back from private equity owner TPG Capital

Poundworld had previously rejected offers to sell through a pre-pack but all options are now being considered.

Management has so far failed to sell the retailer as a solvent business, after turnaround specialists Alteri Investors walked away from sales talks this week.

Deloitte has been preparing contingency plans for an administration in the event of talks collapsing. 

Poundworld’s losses widened in 2016-17 to £17.1 million, from £5.4 million of losses the year before. The retailer was hit with a £5.7 million charge for onerous leases, a provision retailers make when the cost of a lease is no longer covered by the income of the store.

Edwards, 67, founded Poundworld in 1974 and he and his family pocketed millions when it was sold to TPG in 2015 for £150m. Poundworld losses in 2016/17 were £17.1m. 

It has been a swift fall from grace. In 2015 Poundworld revealed record annual sales and profits alongside plans to continue its rapid expansion by opening 60 new stores in 2016. That year the major competitor to Poundland said sales jumped 22 per cent to £422.3million to the year finishing end of March.

Over the period it opened 38 stores, with like-for-like sales up 5.6 per cent. The group, which runs 295 stores across the country, added that operating profits also hit a record, more than doubling by 130 per cent to £14.6million.

Several retailers have shown significant financial distress this year, with both Maplin and Toys R Us disappearing from the high street.   

 



Source link