Chain store cuts ‘last viable’ option
THE boss of department store chain House of Fraser has warned that plans to close 31 outlets and axe 6,000 jobs represent the “last viable” option to save the retailer, with the group at risk of collapse if the proposal is rejected.
The closures, announced yesterday, account for over half of the chain’s 59 store estate across the UK and Ireland and are part of a radical rescue plan.
They are being undertaken through a company voluntary arrangement (CVA) – a controversial insolvency procedure in vogue among struggling retailers – and must be voted through by creditors.
But Alex Williamson, chief executive of House of Fraser, said: “We see it as the last viable, solvent proposal for the business.
“The CVA is an opportunity for all creditors to take a view on whether they believe in the viability [of House of Fraser] as a restructured business.”
If the CVA is approved by landlords, it will affect up to 2,000 House of Fraser staff and a further 4,000 across brands and concessions. If it is rejected and the group fails to secure additional funding, then House of Fraser could be forced to file for administration. House of Fraser said the shops earmarked for closure, including its Oxford Street store, would remain open until early 2019.
The group also plans to relocate its Baker Street head office and the Granite House office in Glasgow to help slash costs and “secure House of Fraser’s future”.
House of Fraser said it has already informed staff set to be impacted by the plans, and was committed to “working with all those affected openly and with sensitivity over the months ahead”.
As well as the store closures, House of Fraser’s restructuring deal will also see the rents slashed for a further 10 stores that will remain open. But landlords, who must vote through the plan, have already expressed serious concerns about the proposals and met on Tuesday to discuss how to respond to House of Fraser. At least 75% of creditor approval is needed, with the vote set to take place on June 22.
Property agency JLL has teamed up with lawyers at Begbies Traynor to unite both institutional and individual landlords, and advise on a course of action on House of Fraser’s plans.
House of Fraser stressed that the group will continue to trade “as normal” online and through stores ahead of the CVA vote and throughout the proposal.
Frank Slevin, chairman of House of Fraser, said: “Our legacy store estate has created an unsustainable cost base, which without restructuring, presents an existential threat to the business.”
Hamleys owner C.banner is being lined up to buy a 51% stake in House of Fraser and invest £70 million into what remains of the business. But its cash injection is pledged only on the condition the retailer can agree the CVA restructuring.