House of Fraser reportedly swung to a mammoth £43.9 million loss in 2017 as the department store chain was battered by Brexit, terrorist attacks and increased online competition.
Revealed in a new stock exchange announcement from C.Banner – the Hamleys parent company that recently purchased a 51 per cent stake in the department store – the pre-tax loss for the 12 months to December 31 compares to a pre-tax profit of £1.5 million in 2016.
In addition, sales at House of Fraser fell 6.3 per cent from £840.9 million to £787.8 million.
The figures highlighted in C.banner’s announcement today refer to the House of Fraser Group, the holding company of both House of Fraser in the UK and Ireland, and include the start-up and operating costs of House of Fraser China.
In December 2016, House of Fraser opened its first international standalone store in Nanjing, China, and opened its second store in September 2017 in Xuzhou, China.
A House of Fraser spokesperson told Retail Gazette that C.banner’s figures do not include the licence fee payable from House of Fraser China to House of Fraser UK for the use of the name in China, nor does it include the sale of house brands for £25 million which was first announced in the Christmas trading update earlier this year.
The spokesperson added that these missing figures will instead be shown in House of Fraser’s UK and Ireland’s business, which ended its fiscal year in January 2018.
In its stock exchange announcement, C.banner said: “The Brexit referendum and the UK’s resultant decision to leave the European Union and the terrorist attack in London, combined with a rapidly evolving retail market, produced a period of uncertainty and volatility that resulted in a difficult trading environment for the whole retail industry in the UK.”
C.banner, which is reportedly spending £141 million to complete its transaction, said House of Fraser would become “more stable” when it completed its yet-to-be-revealed CVA.
It also hoped its new tie-up with House of Fraser would create cost savings in its footwear and toys businesses, as well as in back-office functions such as IT.
“The directors believe that as a leading department store chain in the UK, the target group will be able to take advantage of its well-known brand to capture growth potential,” C.banner said.
The losses come at a perilous time for House of Fraser, which last week confirmed plans to launch a CVA in June as part of the transaction with C.banner.
C.banner entered into a conditional agreement with House of Fraser’s majority owner Nanjing Cenbest to acquire a 51 per cent stake in the business.
Nanjing Cenbest, a subsidiary of the Sanpower Group, will remain a significant minority shareholder after the transaction is complete, which is expected to be finalised by the end of June.
Meanwhile, House of Fraser’s impending CVA is subject to creditor approval and the store restructuring is expected to conclude in early 2019.