Clock ticking for House of Fraser with thousands of jobs under threat

Eleven days to save House of Fraser: Ailing High Street giant is given August 20 deadline to find new finance deal and avoid potential loss of 17,000 jobs

  • The firm is facing a fresh crisis after a Chinese investor pulled its planned funds
  • If there is no cash injection in time the High Street chain will face administration 
  • House of Fraser previously said 31 of 59 stores in the UK and Ireland would shut

House of Fraser is facing a race against the clock to find fresh investment and avoid a calamitous administration that would imperil 17,000 jobs.

The beleaguered department store chain confirmed on Thursday that it must secure funding before August 20 as crunch talks with potential rescuers continue.

The firm has been plunged into fresh crisis after C.banner, the Chinese owner of Hamleys, pulled its investment into the troubled retail chain.

C.banner was planning to buy a 51 per cent stake in House of Fraser and plough £70million into the ailing retailer, but scrapped the move last week.  

House of Fraser s scrambling for cash (PA)

  • Furious Tory MP accuses No10 of launching a ¿witch hunt¿…

    Politicians turn down plans for prestigious new marina flats…

Share this article

Timeline: House of Fraser’s financial crisis

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.

June 7,  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.

August 9, 2018: The chain announces it has just days to find new funding after C.banner pulls out. 

If cash is not injected into the business, it will fall into administration. 

The group said in a statement on the Luxembourg Stock Exchange: ‘House of Fraser confirms that discussions continue with interested investors and its main secured creditors, which are focused on concluding as quickly as possible to enable receipt of an investment required by no later than 20 August 2018.’  

House of Fraser’s lenders, which include HSBC, are now locked in talks with would-be suitors, including tracksuit tycoon Mike Ashley and Philip Day, the billionaire owner of Edinburgh Woollen Mill.

The pair are submitting proposals to rescue House of Fraser this week.

It is understood that an offer by retail restructuring specialist Alteri, which was also in the running, is not being taken seriously by the lending group.

Prior to the latest crisis, House of Fraser had recently agreed a so-called Company Voluntary Arrangement (CVA) with landlords to close half of stores, with 6,000 jobs in the firing line.

Under the rescue plan the chain’s flagship Oxford Street store would have closed along with 30 others including those in Birmingham and Edinburgh. 

The firm, brought by Chinese firm Sanpower for £480million in 2014, would have no stores left open in Wales stores as both the Cardiff and Cwmbran branches were set for closure.

The department store’s struggles are the latest big-name blow to the British high street which is facing crisis as chains increasingly are shutting stores to focus on online sales. 

The retail sector is Britain’s biggest employer with 4.6million working in the industry.

But in recent years as shoppers move online, jobs have increasingly been put as risk with the likes of New Look and Marks and Spencer announcing store closures this year and Maplin and Toys R Us closing altogether. 

House of Fraser was founded by Hugh Fraser and James Arthur in Glasgow in 1849 as a drapery shop called Arthur and Fraser. It took on its current name in 1941. 

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

The chain 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.  

After disappointing Christmas sales last year it announced it would close failing stores and reduce the size of others, beginning the latest chain of financial rescue efforts.  

House of Fraser’s flagship store in Oxford Street (pictured) was one of those set for closure

Decline of the High Street: The retailers struggling to stay afloat as online rivals take their customers

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.

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. 

Source: Read Full Article