Sports Direct has agreed a deal to rescue House of Fraser’s shop on Oxford Street just over a week after acquiring the struggling chain.
The deal will allow the department store to remain on one of London’s key high streets, as the store had been set to close under the terms of the CVA announced in June 2018.
Sports Direct bought House of Fraser out of administration for £90 million on 10 August, with owner Mike Ashley committed to saving 47 of 59 House of Fraser stores.
James Keany, head of national agency at landlord CBRE, said: “This deal only happened because all parties realised it was better to keep the store open and fully operational. It was a real case of landlord and tenant genuinely working together and at great speed. Everyone was sensible about the terms of the transaction.”
It has also emerged that XPO Logistics, a supply chain partner of House of Fraser, may be axing up to 627 jobs due to the department store’s problems. The firm operates warehouses in Milton Keynes and Wellingborough.
According to logistics union GMB, the workers were placed on a 45-day consultation period from Friday.
House of Fraser reportedly owes XPO £30 million, out of a total of nearly £1 billion owed to all creditors.
The news follows Mulberry, which operates 21 concessions at House of Fraser stores, announcing yesterday it expected exceptional costs including restructuring of £3 million in the six months to the end of September.
The brand added that the market had been challenging and if the trends continued the Group’s profit for the whole year would be materially reduced. However, it stressed the brand’s strength in the international market, citing the establishment of new subsidiary Mulberry Korea.
Mulberry’s share price fell 20 percent between Friday and Monday on the news, although it has at the time of writing rebounded around 5 percent.
George Lawrie, principal analyst at Forrester said: “Mulberry directors issued the profit warning because they couldn’t be sure that House of Fraser would meet its obligations. In the long run, however, the outlook is rosy for brands that connect directly to loyal consumers.
“In the past, luxury brands relied on department stores to act as a showroom for their merchandise, but empowered customers value the expert help of department stores less. They instead frequently visit manufacturer or brand websites more than that of the retailer when conducting research or building their wish list. In fact, successful luxury brands that are most diligent are chasing digitally savvy consumers.”
Department store rival Debenhams is also reportedly planning up to 200 job cuts.
Image credit: House of Fraser