Warning from retailer
Problems at House of Fraser ‘terminal’ says Sports Direct tycoon
House of Fraser: future uncertain (pic: Terry Murden)
Sports Direct’s majority shareholder Mike Ashley has warned that problems at House of Fraser were “terminal” as it faces a €674m (£605m) tax demand from Belgian authorities.
The company has said it regrets rescuing House of Fraser in its much-delayed full-year results which reveal a fall in profits.
The firm, which bought the department store out of administration a year ago, said: “If we had the gift of hindsight we might have made a different decision in August 2018.”
Under investment, excessive outsourcing and selling brands to their Chinese parent shortly before administration were just some of the issues the store faced.
It is understood the finance director has resigned and concerns have risen that more House of Fraser stores will close above the five of the 59 shops taken over. Those retained include the Buchanan street store in Glasgow and Jenners in Edinburgh. The outlet at the west end of Princes Street was closed and is being turned into a Johnnie Walker visitor experience by whisky giant Diageo.
“We have done as much as we could realistically do to save as many jobs and stores as possible, and indeed we appreciate many landlords and local authorities have worked hand in hand with us as we tried to do this,” Mr Ashley said.
“However, there are still a number of stores which are currently paying zero rent and that are still unprofitable and unfortunately this is not sustainable.
On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1– Mike Ashley
“We are continuing to review the longer-term portfolio and would expect the number of retained stores to reduce in the next 12 months.
“On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1,” Mr Ashley said.
Underlying profits fell 6% to £287.8m, although Sports Direct said that total sales for the year to 28 April rose by 10.2% to £3.7bn. There was a 5% rise in underlying profits for Sports Direct.
“We were serious with our investment and strategy,” Mr Ashley said about the House of Fraser acquisition.
“However, as we have continued to look under the bonnet as we integrate the business, we have found that the problems are nothing short of terminal in nature.”
Investors had been nervously awaiting a statement from high street retailer Sports Direct after a further delay to publishing its annual results.
Figures were due out at 7am but had not appeared by 8am. Shares closed 3.9% lower.
The company said the results would be published at mid-day and subsequently at 4pm, but each deadline passed without an announcement, prompting analysts to label the situation a “shambles”.
A spokesman for one big City institution, commenting on the release of information after the market closed, said: “This is tantamount to market abuse.”