House of Fraser turnaround a huge challenge

RETAIL: High street ‘not all sunshine and roses’ says finance chief as pressure on sector grows

Sports Direct chief Mike Ashley has said the company faces “significant challenges” turning House of Fraser around, as profits took a hit from the department store acquisition.

The group’s underlying pre-tax profits dropped 26.8% to £64.4 million in the 26 weeks to October 28, the period in which it acquired House of Fraser out of administration.

However, reported pre-tax profits were 62.4% higher at £74.4m and underlying earnings excluding House of Fraser were up 15.5% at £180.3m. Group revenue grew 4.5% to £1.79 billion, reflecting growth of almost 30% in both premium lifestyle sales and non-European retail, as well as the £70m added by House of Fraser.

Mr Ashley reiterated his pledge to make House of Fraser the Harrods of the high street, but said it would be a challenging process.

“I have made my views clear that I believe the previous House of Fraser senior management team traded the business while it was insolvent for a long time,” he said.

“This means we have significant challenges ahead in turning House of Fraser around.

“However, I genuinely believe we have acquired a fantastic opportunity and, with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the Harrods of the high street.”

Meanwhile, in the UK sports retail segment, which accounts for 62% of group revenue, sales were up by 0.2%.

This reflected growth in online sales but a drop in store revenue, partly due to store closures which were part of the group’s elevation strategy, as well as the overall challenges facing the high street.

Deputy chief financial officer Chris Wootton said the group was not immune to the problems in UK retail.

“It’s not all sunshine and roses,” he said.

Sports Direct shares closed down 40.90p at 235.40p yesterday.