House of Fraser doubles profit but warns on volatile retail sector

Department store to axe underperforming brands amid ‘challenging trading conditions’
House of Fraser has been trying to diversify away from its faltering home market but progress has been slow

UK department store chain House of Fraser has warned of “subdued” trading and “volatility” in the retail sector, despite doubling last year’s slender profit margins and making a long-awaited start to its Chinese expansion.

The retailer, which recorded £1.3bn in gross transactions in the year to January 28, notched up a profit of £3.4m before tax and exceptional items, according to a trading update released on Tuesday. 

Chief financial officer Colin Elliot said the “strong” results came “despite continued challenging trading conditions across the retail sector”.
British retailers are contending with sharply higher import costs, with sterling now trading about 15 per cent lower against the dollar than it did on June 23, the day the UK voted to leave the EU. 
Analysts say the hardest-hit companies will be those that sell undifferentiated products that leave them little leeway to pass higher costs on to consumers.
House of Fraser said it was discontinuing “five underperforming house brands”, focusing its efforts on more popular offerings.
Own-label sales at the chain declined 2.1 per cent last year, even as sales of branded products increased 3.6 per cent.
Womenswear sales fell 0.6 per cent, in a year in which clothes shopping seemed to go out of fashion, with official statistics recording the first sustained decline in the nation’s wardrobe additions for more than a decade.
While House of Fraser has for several years been trying to diversify away from its faltering home market, progress has been slow.
Sanpower Group chairman Yuan Yafei talked boldly about his plans to take the House of Fraser chain global when his conglomerate bought the 166-year-old UK department store in 2014.
The Chinese entrepreneur and former local government official promised to inject capital into the cash-strapped retailer, open outposts in Russia and the Middle East — and, most importantly, push into China, with up to 50 new stores under the name “Oriental Fraser”.
Little of that has happened, although the Chinese debut finally came in December with the opening of a store in Nanjing, which had originally been slated for 2015.
The shop, which opened with a parade drummers in traditional bearskin hats, occupies six storeys and sells a “quintessentially English” range of items from more than 300 brands, Sanpower said at the time. 
House of Fraser has repeatedly changed hands over the past three decades, with stints under the ownership of the al-Fayed family and the Icelandic investment group Baugur, which collapsed during the 2008 financial crisis, as well as a stock market listing.

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Posted on April 19, 2017, in #retail, #uk, Other. Bookmark the permalink. Leave a comment.

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