House of Fraser H1 profits and sales hit by heavy discounting
British department store chain House of Fraser half-year earnings fell to an 8.6 million pound loss for the 26 weeks to July 29, 2017, down significantly from its EBITDA profit of 900,000 pounds for H1 2016.
House of Fraser’s like-for-like sales and profits for the first half of the year dropped after being heavily disrupted by HoF’s new online platform launch and “significant discounting” of its in-house womenswear labels. Like-for-like sales fell 5.2 percent compared to 2016 and online sales dropped 9.8 percent during the 26 week period following the roll-out of House of Fraser’s 25 million pounds revamped online store in April. Gross profit slipped 5 percent from 207.2 million pounds in H1 2016 to 196.9 million pounds in H1 2017 as HoF cut prices to move old stock.
HoF sees 5 percent decline in profits for H1 2017
However, in spite of the sales and profits hit HoF remains upbeat about achieving growth in its final quarter, as the impacts caused by its new online platform and womenswear ranges were mainly over. House of Fraser’s new ecommerce system is said to be “working well” as “good progress” has been made to recover sale volumes. The department store group announced that it aims to be trading normally by the beginning of its final quarter in its trading update.
HoF also announced that it has completed the launch of its new womenswear in-house labels, which saw five existing womenswear brands dropped and the remaining four relaunched for AW17. The new collections have been “well received” so far, with “initial revenues” exceeding expectations” added the company. In addition, HoF also began its 18 million pound investment scheme in its distribution centre to increase capacity, drive operational efficiencies and improve profitability during the first half of the year.
The department store chain predicts this investment will deliver 5 million pounds of efficiency savings during the second half of the year, increasing to a run rate benefit of 15 million pounds of efficiency savings by the time the project is completed by mid-2018. House of Fraser also opened its first new store in the UK in nine years time during the first half go 2017. Located in Rushden Lakes, the store opened its doors on August 24. HoF also closed a loss-making store in Leicester and aims to shut an additional location in Aylesbury.
“My observations after a few weeks are that since Sanpower acquired the business in 2014 the primary focus has been on stabilising an enterprise that had been starved of investment for many years,” said Alex Williamson, CEO of House of Fraser. “Whether it be refinancing the business, the investment of over 100 million pounds in capital expenditure since the acquisition or a root-and-branch upgrade of the executive team, much has already been done to prepare us for significant transformation.”
“House of Fraser has much to be optimistic about. This is just the start of our journey with several other projects designed to provide additional sales and costs savings as part of the overall Transformation Programme due to commence shortly. I am excited about what lies ahead for the business and I am optimistic for the future. With the support of Sanpower, we are building the right foundations that position us well to deliver on our ambitions for sustainable profit growth.”