House of Fraser closures: A car crash that we all knew was on its way
There are simply no crumbs for comfort, says Star Business Editor James Pugh.
It’s been like watching a slow-motion car crash. We all knew it was coming, we just didn’t know how bad it would be.
But the rescue plan for House of Fraser is about as bad as it could be, especially for the more than 200 people working at the stores in Shrewsbury and Telford.
Many of them will have worked for the company for a couple of decades, so they will have witnessed the slow, awful decline of the retailer.
The chain, founded in 1849, has come unstuck in a number of ways, having failed to invest in its stores and its online offer.
It was bought by Chinese group Sanpower in 2014 but despite injections of cash here and there, promised investment failed to come through, and debts have weighed.
We are in a time when department stores as a whole have been struggling.
BHS has disappeared and Debenhams has been having a tough time of things as competition from internet fashion stores like Boohoo.com and high street rivals such as Primark have bit deep into their sales. It is the same problem for Marks & Spencer, which is converting some of its general stores to food only after failing to attract fashion concious shoppers in recent years.
At the top end, Harvey Nichols, Selfridges and John Lewis appear to be doing better, creaming off the high end spenders by offering a more enjoyable retail experience. And that is what is happening at places like Merry Hill, where owners intu are creating bigger stores demanded by the likes of Next, Primark, River Island, Topshop and Topman, and JD Sports.
The next step is creating more leisure space – more restaurants and a new cinema. The trick is to make it a day out for the family.
The loss of the House of Fraser stores in Shropshire’s two main towns will undoubtedly leave a big hole. The size of the stores will mean any other retail chain interested in taking on the buildings will need to have very deep pockets indeed.
What next for the retail industry? Shopping is changing forever, the chairman of House of Fraser has warned.
Frank Slevi said his company has no option but to make major structural changes to enable it to trade in the future.
He 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 whilst 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.”
Richard Lim, chief executive at analysts Retail Economics, warned of more bad news to come. He said department stores are expensive to operate and the last few years have seen costs spiralling upwards from business rates, rents and the National Living Wage.
