Big name creditors hit by the collapse of House of Fraser
HOUSE of Fraser collapsed owing creditors such as Armani, Diesel and Prada a total of £484m, new documents have shown.
The department store chain was bought out of administration by Mike Ashley’s Sports Direct last week, but the retail tycoon is not paying suppliers money owed before his rescue.
The two House of Fraser stores in Wales, based in Cardifff and Cwmbran, had both been named in closure plans by the beleagured retail giant when it went for the option of a CVA (Company Voluntary Arrangement) prior to the Sports Direct buyout.
The fate of both stores is now not known.
Sports Direct mogul Mike Ashley has said that he hopes to keep 80% of the 59 House of Fraser stores open, with some having floors or areas converted into Sports Direct stores.
Some 17,000 staff have been
informed that they will be transferred over from House of Fraser to Sports Direct.
House of Fraser yesterday cancelled all online orders not already sent to customers, who will receive a full refund. The move comes after the House of Fraser website was taken offline amid complaints from customers about delayed deliveries since the company was bought by Sports Direct.
The issue reportedly resulted from a dispute involving employees at a key warehouse.
A statement said: “We have taken the decision to cancel and refund all orders that have not already been sent to customers,” the department store said on Facebook.
“We didn’t take this decision lightly, but since we cannot give our customers clear assurances of when their orders will be delivered, we believe cancellation is the best option.
“All customers affected will receive an email about the cancellation and refund in the next couple of days.
“Please accept our apologies for any inconvenience caused and thank you from everyone at House of Fraser for your patience at this time.”
According to a report from House of Fraser’s administrators at Ernst & Young (EY), trade creditors are owed millions between them, with designer brands such as Versace, Gucci and Prada among the biggest names left out of pocket.
EY has estimated that House of Fraser’s unsecured creditors, aside from its employees, who will be transferred to Sports Direct, are owed around £484m.
However, this figure could rise as more creditors send in claims to EY.
A dispute with third-party distributor XPO Logistics over non-payment has led to the closure of House of Fraser’s warehouse and the cancelling of online orders.
According to the EY report, XPO is owed more than £30m.
It also shows House of Fraser was knocked by a 7.7% decline in sales over the first 13 weeks of the year, and gross profit had fallen by £14.6m.
The troubled department store made an operating loss of of £31.4m, which EY said was largely due to the drop in sales.
Outlining the company’s decline, EY said House of Fraser took several steps to try to address the issues, securing a £50m injection of capital in March.
“However, these actions were unable to address the downturn in trading performance and the directors concluded that the business had reached a stage where it was no longer able to continue to meet its ongoing costs in its current format,” the report said.
Mr Ashley purchased House of Fraser for £90m in a so-called prepackaged administration, which allows him to drop certain liabilities through the insolvency process.
House of Fraser’s creditors also include its PR firm, Newgate Communications, which is owed £33,512, and Royal Mail, which is owed £135,465.