It is the end of an era. On Friday House of Fraser’s landlords agreed to a dramatic rescue plan that will trigger the closure of some of the UK’s oldest and best known department stores.
Landmarks such as Howells in Cardiff and Rackhams in Birmingham, which survived two world wars, could be boarded up early next year after being killed off by internet shopping.
House of Fraser landlords backed the unpopular plan, which will result in the closure of 31 of its 59 department stores, including its Oxford Street flagship in London. The company voluntary arrangement (CVA), part of a rescue deal brokered by its Chinese owner, will result in about 6,000 job losses – but the alternative was to plunge into administration.
“This was clearly a difficult decision to take but is ultimately the only one to secure our future,” said House of Fraser’s chief executive, Alex Williamson.
The CVA is a prerequisite of a new investment deal agreed by House of Fraser’s owner Nanjing Cenbest, which is chaired by one of China’s richest men, Yuan Yafei.
It has outlined plans to sell a 51% stake in the streamlined business to another Chinese company, C.banner, which owns Hamleys toy store. C.banner has promised to pump £70m into the retailer.
Landlords have been vocal in their opposition to the plan, arguing that they were being asked to shoulder financial losses while other creditors, such as its bondholders and shareholders, remain unscathed.
Many stores are owned by institutional investors who manage pension funds and other investments on behalf of the public and rely on the income stream the rents produce.
House of Fraser traces its origins back to 1849, when Hugh Fraser and James Arthur opened a drapery shop on the corner of Argyle Street and Buchanan Street in the centre of Glasgow. By 1941, it had expanded into a number of shops in Scotland and became House of Fraser.
The 1950s marked a period of major expansion for House of Fraser. In 1953, still owned by the Fraser family, the group extended its geographic reach across Scotland and into north-east England and Carlisle with the purchase of the Binns chain, which had its origins in an early 19th century Sunderland drapery business. Harrods, the luxury London department store, and Dickins & Jones, became part of the House of Fraser group in the late 1950s.
Growth continued in the 1970s, with the addition of well-known names such as Rackhams, the Army & Navy stores and Dingles.
Change came in 1985 when the House of Fraser group was bought by the Al Fayed family for £615m and a new business strategy was announced, with plans to replace smaller branches with larger stores.
In 1994 House of Fraser was floated on the London Stock Exchange at a market value of £484m, with Harrods split off and kept under private ownership by Al Fayed.
A takeover bid from Scottish retail entrepreneur Tom Hunter was rejected in 2003 and some branches in Scotland were sold or closed.
However, two years later the group was in expansion mode again, buying 16 stores under the Jenners and Beatties brands became part of the group in 2005. Large new store openings followed in 2008 at locations including Belfast, Bristol and the Westfield shopping centre in west London.
In 2013, House of Fraser opened its first store overseas, in Abu Dhabi’s World Trade Center shopping mall.
House of Fraser was bought by China’s Nanjing Xinjiekou Department Store Co – also known as Nanjing Cenbest – in 2014. Angela Monaghan
At a fractious meeting in central London, management were questioned by creditors for more than two hours. In the end, the company received the necessary 75% of votes to allow the CVA to proceed.
The closures are a fresh blow to the UK’s high streets, which are shedding stores and jobs at a faster rate than during the recession in 2009. Property experts calculate that 1m sq metres of store space has been dumped by retailers this year, which is more than in 2016 when the 160-store BHS chain went into administration.
This trend is writ even larger in the US, with analysts predicting another record breaking year of store closures as the collapsed Toys R Us chain and struggling Sears group beat a retreat. This is on top of a dire 2017, when a staggering 9.75m sq metres of retail space was closed in America as struggling main street veterans, such as Macy’s, found themselves on the ropes.
When House of Fraser announced the plan this month its chair, Frank Slevin, gave a stark assessment of the 169-year old department store chain’s predicament: “Our legacy store estate has created an unsustainable cost base which, without restructuring, presents an existential threat to the business.”
The shadow cast by the digital high street is getting ever bigger. Last year one in every five pounds Britons spent on shopping was online, with the biggest shifts in clothing and footwear.
Analysts at Retail Economics consultancy firm predict 50% of clothing and household goods will be bought online within a decade, double the current level.
The group of stores being closed by House of Fraser includes outlets in major cities such as London, Birmingham, Edinburgh and Cardiff, but others are dotted around the country in places such as Darlington, Shrewsbury and Carlisle.
These once grand stores are left over from a golden age when every major regional town and city could support its own independent department store.
The stores that will close – which employ 2,000 House of Fraser staff and 4,000 in concessions – are expected to continue trading until early 2019.
“This is legacy space from a time when you were able to successfully trade a three or four storey shop in a medium-sized town,” said Dan Simms, co-head of retail agency at Colliers International.
“With department stores you have to shovel a lot of money in to get money out … stores at the top end like Selfridges and Harvey Nichols are managing to do this.”
On Tuesday, Debenhams warned of a fresh slump in profits as the retailer also struggles to reinvent itself in a punishing trading climate.
Last year its boss, Sergio Bucher, admitted some of its shops looked tired and old and customers had to go on a “treasure hunt” to find what they wanted, but tough trading conditions mean it has had to rein in plans to spend millions of pounds on store revamps.
“The department store is not necessarily a doomed format, it has just become stale,” said Richard Lim, the chief executive of Retail Economics.
“They are incredibly expensive to operate and scale is a hindrance when you are trying to turn a business around. House of Fraser has got a mountain of debt so it doesn’t have the money to innovate and refresh its stores.”
