House of Fraser owner Frasers Group has warned that further department store closures could be on the cards amid dwindling profits and lower in-store shopper numbers.
Frasers, which is owned by Mike Ashley, said in its delayed results today: ‘There are anticipated to be further closures over the coming period, the number of which will depend on the outcome of lease negotiation.’
Since snapping up House of Fraser in 2018, Frasers has earmarked a number of the department store’s shops for closure, with five of its 53-strong estate shut down in the last year.
Warning: House of Fraser owner Frasers Group has warned that further department store closures could be on the cards
In a sign of the direction the business plans to head, Frasers said it wanted to spend ‘in excess’ of £100million on a digital upgrade across its brands, and in particular Flannels.
It said it had been speaking to landlords about overhauling its rental agreements, suggesting more should enter into long-term deals to share till takings in lieu of rent.
Across all its businesses, which include a string of well-known brands including Sports Direct, Evans Cycles and Jack Wills, Frasers said annual pre-tax profits fell by 20 per cent to £143.5million in the last year, as lockdown store closures led to ‘the most challenging year’ in its history.
But, sales across its brands swelled by nearly 7 per cent to £3.96billion in the year to 26 April compared with a year ago.
Frasers, which runs 367 Sports Direct stores in England alone, said Covid-19 and the need to adhere to Government social distancing guidelines meant its program of planned store openings could be ‘impacted.’
The group, however, said it still planned to take advantage of empty spaces cropping up in shopping centres to further expand its shop portfolio.
Owner: Frasers, owned by Mike Ashley, said annual pre-tax profits fell by 20% to £143.5m
Ailing: Frasers has previously expressed an interest in taking control of Debenhams
Frasers also called the ‘further demise’ of ailing department store chain Debenhams ‘scandalous’ in its delayed preliminary annual results today.
Frasers has previously expressed an interest in taking control of Debenhams.
It said: ‘We continued to follow the further demise of Debenhams during the year with much frustration and disappointment as it entered administration for a second time.
‘We raised our concerns and gave numerous warnings about what we were seeing there, much of which has materialised. Our offers of help were repeatedly disregarded and it is scandalous that this business has now been in administration twice.’
Portfolio: Sports Direct is one of the big-name brands in Frasers’ business empire
Around 14,000 jobs could be on the brink at struggling department store Debenhams.
Plans to liquidate the business are being drawn up in case other options for saving the company – such as selling it – fall through.
If the ailing department store chain collapses – and all 14,000 jobs are lost – it would be the single biggest cull of the coronavirus crisis.
Debenhams’ hedge fund owners have brought in a group called Hilco Capital, which specialises in winding up retailers, to put together a series of ‘contingency plans’. The clock is ticking for Debenhams, which has 124 stores across the UK, as its owners want to sell it by the end of next month.
Although Debenhams is a stalwart on Britain’s high streets, the firm has been in financial turmoil for several years.
It has been in administration since April – when it became one of the first retail casualties of the coronavirus crisis, which led to an abrupt halt in shop trading. Earlier this week it announced it was axing 2,500 more jobs – after cutting around 4,000 earlier in the year.
However, even if Debenhams’ owners don’t find a buyer soon there are other options on the table, such as the current owners taking it out of administration or bringing on new investors.
Ashley’s Frasers today also called on the Government to raise corporation tax by 1 per cent to increase funding for the NHS.
Analysts had been expecting Frasers to release its annual figures in mid-July, but the date was then pushed forward twice to 12 August and today, 20 August.
Last year, Frasers shocked the City when it delayed its accounts by a week before a fraught results day, which led critics to call it ‘an embarrassment to UK corporate governance’.
Part of the firm: Fashion label Jack Wills is another company in Frasers’ portfolio
When it finally released them late in the afternoon, ten hours after they were scheduled, it announced a £614million tax bill. Its auditors Grant Thornton resigned in protest, raising concerns about the time it took to pass the information on.
FTSE-250 listed Frasers has seen its share price jump sharply today, and it is currently trading up 14.52 per cent or 44.40p to 350.20p, while a year ago the price stood around the 240.00p mark.
Michael Hewson, chief analyst at CMC Markets UK, said: ‘All in all, given the challenges facing the retail sector these numbers are much better than expected, with the range of brands under the Ashley umbrella helping to absorb some of the retail shocks, given that he also owns Evans Cycles and GAME Digital, which have broadly down better than most as a result of the pandemic.
‘On the downside the company said it was likely going to have to close more stores as more and more business went online, though it was more optimistic about the outlook forecasting a 10% to 30% improvement in underlying earnings, despite the challenges being posed by the pandemic.’