Department store chain will shut 31 outlets, including London flagship
Full list of 31 House of Fraser stores under threat of closure
High street 2018: lost shops and at least 35,000 jobs at risk
House of Fraser is to close more than half its UK stores, putting a further 6,000 jobs at risk and dealing another hammer blow to the high street.
The struggling department store group’s Oxford Street flagship in London and outlets in cities including Birmingham, Cardiff and Edinburgh are among the 31 facing closure.
The move by the 169-year-old company is part of a rescue plan that will also lead to House of Fraser moving out of its head offices in London and Glasgow.
Alex Williamson, the retailer’s chief executive, said it would close a distribution centre in Milton Keynes, threatening an unknown number of jobs. Without the proposed store closures, House of Fraser said the business was likely to collapse.
“A decision to close this number of stores is not done lightly. This is really grim,” Williamson said. “It is a highly emotional, highly regrettable situation that none of us either imagined or wanted to see happen, but there is simply no alternative.”
The 31 stores will close by early next year under a company voluntary arrangement (CVA), a form of insolvency that enables a business to rearrange deals with landlords. Creditors will have to vote on the deal, which includes reducing rents by 25% at 10 other stores, on 22 June.
The House of Fraser chairman, Frank Slevin, 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.
“So while 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.”
Dave Gill, national officer at the shopworkers union USDAW, said:“This is devastating news for House of Fraser employees. We are receiving calls from loyal and long-serving staff who are extremely worried, including those who work in brand concessions and are not directly employed by House of Fraser.”
He added that although House of Fraser does not recognise Usdaw he had asked the retailer “ to engage in urgent talks, so that we can challenge the business case, investigate what can be done to save jobs and represent our members’ best interests.”
The restructuring is a condition of a deal that will give control of House of Fraser to the Chinese C.banner business, which also owns Hamleys.
C.banner is buying a 51% stake in the parent company of the ailing department store group for £140m, leaving the current owner, Nanjing Cenbest, part of China’s Sanpower conglomerate, with a minority stake.
House of Fraser’s CVA comes after a string of retailers and restaurant groups have used the process to close outlets, including Mothercare, Carpetright, New Look and Jamie’s Italian.
It is feared House of Fraser could struggle to complete the CVA, as landlords and lenders have expressed concerns about a lack of consultation and that C.banner will not be able to inject sufficient cash into the business to turn it around.
Williamson said management had been forced to take brave decisions, including closing some of its most high-profile stores, to try to ensure the business had a viable future. “There are too many case studies of CVAs that have not worked, and this is not going to be one of them,” he said.
C.banner had committed to putting £70m into House of Fraser after the restructure, which he said was about creating a “sustainable platform” that would give shareholders and other stakeholders the confidence to continue investing in the business.
The company has also put another £1m into its pension fund after discussions with trustees, who expressed concerns about protections for savers in the restructure.
On Thursday, landlords called for an urgent government review of the rising use of CVAs, which they say risks undermining the UK’s reputation and deters investment in town centres.
The British Property Federation said it believed the process was being misused.
Melanie Leech, the chief executive of the landlords’ group, said: “The CVA process is intended to be part of a comprehensive business recovery plan. Property owners, looking after savers’ and pensioners’ money, will support businesses who demonstrate this commitment, but must protect those pensioners against unfair action that penalises their interests.”