House of Fraser boss claims business has been "starved of investment for many years" as profits drop

 
Catherine Neilan
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HoF's profits stumbled on the back of Sanpower's transformation plan (Source: Getty)

House of Fraser's new chief executive has claimed the department stores has been "starved of investment for many years" as it reports a first half drop in profit and sales.

Gross total value at the department store firm, which has been owned by Chinese conglomerate Sanpower since 2014, fell 5.2 per cent to £545.8m in the 26 weeks to 29 July, dampened by "web disruption and the clear out of legacy womenswear house brand stock".

Gross profit fell to £196.9m, from £207.2m last year, while adjusted EBITDA turned from a profit of nearly £1m to a loss of £8.6m on the back of those two factors. Online sales were down 9.8 per cent for the period.

"Significant disruption" was caused by a £25m "replatforming" of the website in April, although HoF said good progress had been made since and it expects to be trading normally by the critical last quarter of the year.

On the womenswear front, five house brands were "terminated", four relaunched and a new one, called Issa, rolled out new. There was "significant discounting activity" to clear legacy stock but initial revenues are exceeding expectations and the second half should be much stronger, the retailer said.

HoF opened a new store for the first time in nine years in Rushden Lakes on 24 August, which it says is "trading strongly and will be a valuable addition to the group’s portfolio". HoF's loss-making Leicester store has been closed and it plans to exit its Aylesbury store later this year.

Chief executive Alex Williamson, who was poached from Goodwood in May, said he had "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.

"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.”

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