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House of Fraser transformation hits sales and profits

House of Fraser ‘s majority shareholder this month stepped in to support it to the tune of £15m after disruption to online sales caused by its ongoing transformation programme, the retailer said today.

The department store reported that gross transaction volumes for first half of its financial year came in at £545.8m, with like-for-like sales down by 5.2% compared to the same period last year. Online sales fell by 9.8%. Gross profits came in at £196.9m down from £207.2m last time, while losses before interest, tax and asset writedowns (EBITDA) widened to £8.6m from £0.9m last time.

House of Fraser says web sales were “significantly disrupted” when it moved to a new £25m platform in order to access “a range of world-class cloud-based technologies”, following “many years” in which, says incoming chief executive Alex Wiliamson, the business was “starved of investment”. It says the system is now working well following initial disruption. But it doesn’t expect trade to recover to normal levels until the final quarter of this year, in around four to six weeks time. In the meantime, its majority shareholder House of Fraser Group, ultimately owned by Chinese-listed Nanjing Cenbest, has this month stepped in to support it to the tune of £15m, “in recognition of the impact of the Transformation Programme on short-term financial performance”.

Last April’s replatforming came as a transformation programme based on product, customer and infrastructure got underway with the aim of moving from a transactional customer experience to one that is an “experiential lifestyle-led relationship”.

Profits were also affected as House of Fraser cut the prices of legacy house brand stock ahead of the launch of its new womenswear range, Issa, as well as the relaunch of four other in-house brands. Five other in-house brands were discontinued.

House of Fraser is now investing £18m in distribution, of which £10m, additional to the £15m investment, comes from its majority shareholder, with the aim of increasing capacity, making operational efficiencies and improving profitability. This project, it said, is now progressing well and expected to deliver £5m of efficiency savings in the second half of the year, rising to £15m by the time the project completes in mid 2018.

House of Fraser has also looked again at its store estate, opening its first store for nine years at Rushden Lakes, and closing stores in Leicester and, pending, in Aylesbury.

During the first half of the year, Alex Williamson took over as the new chief executive and Michelle Maynard as the new chief people officer.

Today Williamson said: “House of Fraser has many wonderful qualities and I have high expectations for the business. My observations after a few weeks are that since Sanpower acquired the business in 2014 the primary focus has been on stabilising an enterprise that had been starved of investment for many years. Whether it be refinancing the business, the investment of over £100m in capital expenditure since the acquisition or a root and branch upgrade of the executive team, much has already been done to prepare us for significant transformation.

“And House of Fraser has much to be optimistic about. Our new House Brand Womenswear collections for Autumn/Winter have been launched and our customers’ response to date has been very encouraging. Our new web platform greatly improves our customers’ experience and online margins whilst our investment in the distribution centre will deliver cost savings through improved operational efficiencies. And this is just the start of our journey with several other projects designed to provide additional sales and costs savings as part of the overall Transformation Programme due to commence shortly.

“I am excited about what lies ahead for the business and I am optimistic for the future. With the support of Sanpower, we are building the right foundations that position us well to deliver on our ambitions for sustainable profit growth.”

House of Fraser said that now its ecommerce re-platforming and legacy womenswear house brand clear out is largely complete, it expects underlying trading to reflect the general market conditions across the retail industry. It expects to see sales grow in the final quarter of the year.

House of Fraser trades from 59 stores in the UK and Ireland and online via

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