House of Fraser owner could close more big shops as department store model ‘broken’

The proprietor of Home of Fraser has stated it may shut extra shops, after shutting eight prior to now yr and declaring “the division retailer globally is damaged”.

Michael Murray, the chief government of Mike Ashley’s retail empire Frasers, which additionally owns Sports activities Direct, the designer road vogue chain Flannels and a plethora of manufacturers from Jack Wills to Evans Cycles, stated its division retailer portfolio was “regularly underneath overview” and a few retailers had been “nonetheless too huge”. “We have now to search out options for the surplus house,” he stated.

Home of Fraser has already virtually halved in dimension from 59 shops to 31 because it was purchased out of administration by Ashley’s retail empire in August 2018. Murray stated that traditionally shops would have been 150,000 sq ft or bigger, which was now “too huge” and meant that previously they “didn’t have the funding” they wanted. The group now desires shops of about 50,000 sq ft or smaller.

Home of Fraser’s newest closures comply with a pattern of decline for conventional department shops, with the UK’s Debenhams chain now online-only after collapsing into administration in 2019, whereas Beales is lowered to only a handful of shops after going bust in 2020. John Lewis has shut 16 shops since 2020, leaving it with simply 34, whereas Fenwick is to close its flagship London store on Bond Avenue subsequent yr after 130 years of commerce.

Murray’s feedback got here as Frasers reported that pre-tax income for the group virtually doubled to £660m after gross sales rose 16% to £5.6bn within the yr to 30 April.

Gross sales on the group’s premium division, which incorporates Flannels and Home of Fraser, rose 5.7%, earlier than acquisitions, however the division sank to a lack of £100,000, from a £10.5m revenue a yr earlier than, after shedding enterprise charges aid and taking a £19.8m hit from retailer closures.

Gross sales on the core Sports activities Direct chain had been just about flat yr on yr, excluding acquisitions, however income greater than doubled to £447m because the group stated a greater relationship with the important thing model Nike and different labels had helped it enhance revenue margins whereas it made further income on property disposals.

Frasers’ gross sales had been helped by a slew of acquisitions, together with the web specialist Studio Retail and several other manufacturers from JD Sports activities. Murray indicated there could be extra to come back.

He stated the group would proceed to construct stakes in listed firms as that was vital in transferring relationships ahead. “Everybody can speak about making an attempt to drive a strategic relationship but when somebody doesn’t put their cash the place their mouth is and take step one then [nothing changes]. While you personal 10% to twenty% everybody’s targeted to make issues occur. You might be having conversations,” he stated.

Whereas he wouldn’t touch upon Frasers’ plans for particular firms, Murray added: “There’s going to be alternatives and we’re effectively positioned to capitalise on them. We have now a robust business main platform for serving to these companies and taking advantages for our enterprise.”

The corporate stated it anticipated to make as much as £550m in underlying revenue within the yr forward regardless of a tricky shopper surroundings as it could be “staying targeted on price inflation”.

That might be a step up from the £478m of underlying revenue within the yr to April, which got here after excluding one-off advantages together with a £55.2m acquire on the acquisition of some manufacturers from JD Sports activities and £17m associated to the sale of a stake in Kangol.

On Thursday, Frasers stated it had elevated its stake within the on-line retailer Asos by one other two share factors to fifteen%. This week it has additionally upped its stake within the on-line vogue website Boohoo from 5% to six.7% and N Brown from 18% to 19%.

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