Sports Direct in talks over House of Fraser closures
Sports Direct is in talks with House of Fraser landlords in a move that could hasten potential store closures if agreements on rents and leases fail to be reached.
Commercial real estate services firm CBRE has confirmed it has been appointed to advise Sports Direct “on all property-related matters in relation to its recent acquisition of House of Fraser”.
Some landlords have already been in touch with CBRE, which said “contact will be made to all landlords over the following days”.
Talks will centre on rental costs and the length of leases, though local councils will also be part of negotiations in some cases, given the impact of business rates on the retailer.
When Sports Direct bought House of Fraser for £90m last week, Mike Ashley announced he wanted to transform the ailing retail chain into “the Harrods of the high street” and said “we will do our best to keep as many stores open as possible”.
This gave renewed hope to staff at the retailer’s two Welsh branches. Both the stores in Cardiff and Cwmbran had been placed on the list of closures announced by House of Fraser in June.
It was reported that both stores were set to close in January.
The stores, and staff, were left in uncertainty again as the Company Voluntary Arrangement (CVA) was disputed by landlords, with many fearing the axe may fall this side of Christmas.
When Mr Ashley announced he had acquired House of Fraser, some 17,000 staff were informed that day they were being transferred over to Sports Direct.
This means staff at the two Wales stores are again facing a period of uncertainty as to whether they will be made redundant.
Doubt still remains over the long-term future of jobs and whether Mr Ashley will shut underperforming stores as part of a restructuring programme.
However the Cardiff store was running at a profit, according to its landlord, who was “shocked” when it was placed on the list of stores to close.
Azeemeh Zaheer, CEO of Naissance Capital Real Estate, who acquired the site in 2016, said in the early summer: “In December 2017 I was told by one of their [House of Fraser] executives that when they looked at the stores, Cardiff didn’t fall into the list of stores they considered not viable or potentially to close.”
Since the decision was made, Ms Zaheer has been looking at viable options for the site, which extends to 270,000 sq ft of retail space and occupying a prime 1.7 acre site. One of the ideas mentioned at the time for the Grade IIlisted building to become a hotel.
The Cwmbran store, which employs around 100 staff, used to be a David Evans department store before House of Fraser bought it in the late 1970s.
Sources have told the Press Association that Mr Ashley will now begin turning some House of Fraser stores into Sports Direct outlets and rebranding others under the Flannels fascia.
Sports Direct has a large outlet in St Davids 2 in Cardiff, although there is no outlet in Cwmbran.
The landlords for both the Cardiff and Cwmbran sites have been approached for comment.
Mr Ashley’s deal was struck last week through a pre-pack administration process, where a company is put into administration before a new buyer cherrypicks the best assets.
It came after C.banner, the Chinese owner of Hamleys, pulled plans to buy a 51% stake in House of Fraser and plough £70m into the ailing retailer.
Mr Ashley beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill, whose proposal was understood to be in excess of £100m. While it would have avoided an administration and included House of Fraser’s pension scheme, administrators EY opted for Mr Ashley’s offer.