Daily Mirror (Northern Ireland)
HARRODS OF THE HIGH ST
Ashley vows to re-vitalise group and save ‘as many stores as possible’
BILLIONAIRE Mike Ashley vows to transform House of Fraser into the “Harrods of the High Street” after buying the collapsed chain.
The Newcastle United owner snapped up the department store giant for £90million – safeguarding jobs for now and promising to take it upmarket.
But there was no word on the longterm future of House of Fraser’s 16,000 strong workforce – 5,900 hired directly and 10,100 by in-store concessions.
And around 10,000 members of the chain’s pension fund face being short changed because of the way it was sold.
Mr Ashley’s Sports Direct empire bought House of Fraser after it collapsed into administration yesterday.
It marked the biggest high street failure since Woolworths went bust a decade ago with the loss of 27,000 jobs, and BHS two years ago, when 11,000 workers got the chop.
Mr Ashley failed to give a firm pledge on jobs at House of Fraser.
He said only: “We will do our best to keep as many stores open as possible.”
His comments failed to convince unions, who are concerned over Sports Direct’s previous treatment of workers.
In 2016 a report by the Business, Innovation and Skills select committee found the firm’s working practices to be “closer to that of a Victorian workhouse than a modern, reputable high street retailer”.
Scott Lennon, of Unite, said yesterday: “Sports Direct is a leopard that has not changed its spots and we hope its poor record on pay and employment practices are not transferred to House of Fraser.
FEARS
“We fear for jobs and employment conditions at the House of Fraser going forward. The staff are entering a period of great uncertainty and worry.”
Dave Gill, of shopworkers’ union Usdaw, said: “It is crucial that staff are treated with dignity and fairness.”
Retail analyst Richard Hyman said: “People are being treated shabbily. It’s disgusting and they deserve a lot better.”
The £90million sale price comes despite the business having assets of nearly £950million as of January.
But the chain had racked up heavy losses and was lumbered with £400million debts – leaving it due to close 31 of its 59 stores.
Those plans are up in the air after the deal with Sports Direct, which already owned an 11% stake in House of Fraser, and all eyes are on what Mike Ashley, 53, will do with the business.
The maverick tycoon has gone from opening a sports shop at 18 in 1981 to overseeing a retail empire and amassing a £2.8billion fortune.
He has snapped up older sports brands Slazenger and Dunlop. Sports Direct also owns a big stake in Debenhams, another struggling chain, as well as Goals Soccer Centres and online fashion firm Mysale.
Yesterday’s deal was seen by some as Mr Ashley staking a claim as king of the high street. Plans include turning some House of Fraser stores into Sports Direct or Flannels, its upmarket fashion chain.
Mr Ashley said: “It is vital we restore the right level of ongoing relationships with the luxury brands. My ambition is to transform House of Fraser into Harrods of the high street.”
As it happens, House of Fraser owned upmarket London store Harrods between 1957 and 1994. And Mr Ashley previously vowed to turn Sports Direct into the “Selfridges of sport”.
House of Fraser was bought by Sports Direct in a controversial deal, known as pre-pack administration. This normally involves a buyer snapping-up a business, minus its debts and pension fund.
It is believed 10,000 members in House of Fraser’s two main defined-benefit pension schemes, which have more than a £160million shortfall under a “buy-out” valuation, will transfer to an insurance firm. However, members who have yet
People are being treated shabbily and deserve better
RICHARD HYMAN RETAIL ANALYST ON NEW DEAL
give up work could see their pension pots cut and those who have retired will get smaller annual increases. But expert John Ralfe said members were better off than if the schemes ended up with the Pension Protection Fund rescue body.
“The bad news is that even this higher level will be less than the full pension promise members expected,” he said.
It is understood administrators at EY, and House of Fraser’s banks, chose Mr Ashley over a more than £100million offer from rival billionaire Philip Day.
The option put forward by Dubaito based Mr Day, who owns the Edinburgh Woollen Mill chain, would have avoided an administration and included House of Fraser’s pension scheme.
Richard Lim, of Retail Economics, warned: “Turning around the business will not come easy. The stores are failing to attract sustainable levels of footfall while battling against rising operating costs and shifts in shopper behaviour.”
An estimated 90% of House of Fraser’s stock is owned by in-store concessions, rather than the firm itself.
House of Fraser’s collapse came four years after Chinese firm Sanpower, controlled by chain-smoking deal maker Yuan Yafei, bought 89% of the business for £480million.
Plans to open a chain of House of Fraser stores in China flopped.
Mr Yuan, one of China’s 100 richest people who has amassed a big collection of Chinese art, had planned to sell a 51% stake in the chain to C.banner, a Hong Kong-listed footwear retailer, run by his brother-in-law Chen Yixi.
That deal fell through, ultimately triggering House of Fraser’s collapse.