They are ghosts from the retail past: Hugh Fraser, James Howell and John Rackham. Long-dead retail entrepreneurs who made their fortunes opening local department stores when they represented an exciting future.
But last week the stores, still affectionately called Frasers, Rackhams and Howells by local shoppers who resisted attempts to rebrand them, were on a brutal closure list announced by stricken department store chain House of Fraser.
The historic stores dotted around the country in places such as Darlington, Shrewsbury and Cardiff are relics of a golden age when every regional town and city could support its own department store. But in a cutthroat retail climate they are in the firing line, as struggling retailers balk at the investment required to modernise stores.
“Darlington had a big revamp a couple of years ago but if you go to Carlisle or Cirencester the stores are very higgledy-piggledy and need investment,” says Graham Soult, who runs retail consultancy CannyInsights. “Some stores have not been touched for a long time and are too far gone to put right now.”
The decision by the loss-making department store to pull the plug on half its sites, eliminating as many as 6,000 jobs, could be viewed as another instalment in this year’s high-street crisis, which has seen Maplin and Toys R Us disappear from the high street and major chains including Marks & Spencer, Carpetright and Mothercare announce store closures.
Retailers that have gone bust 2017-18
Toys R Us: 180 stores employing 3,000 staff, collapsed 28 February. Owes £15m in VAT, due by 1 March.
Maplin: 200 electronics and gadget stores, founded 1972, also failed on 28 February.
Warren Evans: bedmaker went into administration earlier in February.
East: fashion brand with nearly 50 outlets folded in January.
Juice Corp: business behind brands including Elizabeth Emanuel and Joe Bloggs went under in January.
Multiyork: furniture chain with 50 stores went into administration in November.
Feather & Black: bedroom furniture and bedding specialist with 25 outlets fell into administration in November.
Retailers under pressure
New Look has debts of more than £1bn and has lost some of its credit insurance cover, which protects suppliers if a retailer goes bust. In the 10 months to Christmas, sales fell 11% and losses hit £123m. The company intends to close 60 stores and change its fashion ranges, but faces a struggle to win back young shoppers.
House of Fraser's Chinese owner, Sanpower, had to stump up £25m to see the store through Christmas and its debt is rated as junk. The retailer is attempting to reduce the size of its stores by 30% and has asked landlords to cut rents.
Debenhams, a 178-store chain that is more than 200 years old, is axing one in four of its managers and considering closures to cut costs. It has warned that profits have been hit by lower than expected sales, with profit margins also down as a result of having to cut prices to match rivals.
But there is more to it at House of Fraser than high street crisis 2.0. Some landlords have been blindsided by the scale of the closure programme and the meagre terms being offered via the company voluntary arrangement, the insolvency process used to jettison stores. The extensive closure programme involves not only provincial outposts, but two stores in central London and large branches in Birmingham and Edinburgh.
Landlords are in open rebellion over the plan, which they view as an unfair cherrypicking exercise by House of Fraser’s wealthy Chinese owner, Sanpower, which is chaired by one of China’s richest men, Yuan Yafei. Sanpower has set up a £140m side deal that will hand control to another Chinese group, C.banner, which owns Hamleys. Making good on the restructuring plan is a prerequisite of the deal that will inject £70m of new funds into the business.
House of Fraser’s Cardiff branch, which dates back to 1856, is still known locally as Howells. Azeemeh Zaheer, chief executive of Naissance Capital Real Estate, which owns the premises, said the company only found out the night before the CVA was announced that it was on the list.
“I was shocked,” said Zaheer, who claimed the firm had been amenable to a plan that would have cut the size of the shopfloor from 300,000 sq ft to 80,000 sq ft. “We had been discussing reducing the floor plate of the store and spending money on architects and surveys so we could create a viable shop for them to trade out of.”
Department store chains are struggling as the transfer of sales to the internet makes it harder to turn a profit from sprawling high street sites, many of which incurred hefty increases in business rates – the commercial equivalent of council taxes – as a result of last year’s revaluation. At the same time, shoppers have reined in spending on clothing and household goods because of a squeeze on spare cash and a shift to renting rather than owning homes.
Like many of House of Fraser’s longstanding stores, the grade II-listed site in Cardiff is a hodgepodge of several buildings. House of Fraser was behind on millions of pounds’ worth of repair work. Zaheer says Naissance Capital does not intend to back the CVA, which requires three-quarters of landlords voting to approve it.
The property industry’s resistance to having an estimated 3.3m sq ft of retail space – the equivalent of more than 50 football pitches – dumped back into its hands without compensation is understandable. Agents are still trying to find homes for about a third of BHS’s 160 stores – two years after it crashed into administration – and rivals such as Debenhams are also planning closures. There are a limited number of contenders to fill empty stores, such as Sports Direct, Primark and Days, the new venture of retail entrepreneur Philip Day.
But Alex Williamson, House of Fraser’s chief executive, insists the retailer is fighting for its very survival: “It is a highly emotional, highly regrettable situation that none of us either imagined or wanted to see happen, but there is simply no alternative.”
Richard Hyman, an independent retail consultant, said creditors would probably agree to back the CVA, but that House of Fraser’s problems ran much deeper.
“House of Fraser is telling us that it cannot any longer trade profitably in retail hotspots like central London, Birmingham, Edinburgh and Cardiff. If it cannot find enough of its target customers in these prime locations, where can they? This speaks volumes about its own management team’s confidence in the brand.”
