Discounting hit stores:

THAT Mike Ashley and his Sports Direct group paid

£90 million, reportedly in cash, to buy House of Fraser hours after it entered administration is fantastic news for the 17,500 working there – but what a roller coaster ride they are on.

The planned closure of 31 of its 59 stores has been halted while the new owner plans what to do with the 169-year-old lossmaking department store chain.

House of Fraser throws a spotlight on the state of the entire high street. It is widely recognised rising costs for both products and premises, coupled with lower consumer spending and the internet’s globalisation of shopping habits, have put the high street under unprecedented pressure.

But that’s obviously not the whole picture because while there are high street casualties there are a host of others who are positively thriving.

House of Fraser’s problem is an increasingly common one: its product is not flying off the shelves because there is a huge disconnect between the customer and the products on offer, leading the company into a spiral of constant discounting, and the firm is not alone.

At present, 53 per cent of all fashion products being sold in the UK are being offered at a discounted price, with a number of big high street retailers admitting to sitting on huge piles of unwanted stock. H&M apparently has $4.3billion worth.

But, surely, Mr Ashley is an unlikely buyer for the department store chain, given it was Debenhams (House of Fraser’s main rival of which he owns almost 30%) poor performance that was blamed for the recent 73% drop in the Sports Direct Group profits? Well, no.

I think the department store model can still work as long as it is built around what the customer wants and Mr Ashley certainly has the ability to align his.

As for what he will do with House of Fraser I think his strategy will be to either stack it high and sell it cheap or he will fulfil his stated ambition to build a premium lifestyle brand, building HOF into a high-end premium department store chain, more akin to his Flannels department stores, selling luxury and designer goods.

The House of Frasers of the future will undoubtedly be very different to the one built by its Glaswegian founder, but if anyone can resuscitate the brand and make its product relevant on today’s high street for today’s consumers I would put my money on Mr Ashley and the Sports Direct Group.

Given his stake in another department store giant, don’t be surprised if we’re talking about House of Debenhams in 2019.