House of Fraser plans to close more than half its department stores in the UK and Ireland, threatening 6,000 jobs, as the struggling chain pursues insolvency procedures aimed at securing new investment.
The company is seeking to shut 31 of 59 outlets through a British insolvency provision called a company voluntary arrangement. Chinese retailer C.banner International Holdings has pledged to pump fresh capital into House of Fraser if it shuts stores.
“We, as a management team, have a responsibility to take necessary steps to ensure House of Fraser’s survival, which is why we are making these proposals,” chief executive Alex Williamson said in a statement Thursday.
If approved, the closures would add to the mounting shop vacancies on British shopping streets. The rise of e-commerce, which makes up nearly one-fifth of the UK’s retail sales, has left store owners with declining sales even as rent bills rise. Fashion retailer New Look, baby and childrens-wear retailer Mothercare and floor-coverings seller Carpetright have all had CVA’s approved this year.
“Department stores are incredibly expensive to operate,” Richard Lim, CEO of consultancy Retail Economics, said by email. “These traditional retail business models are simply becoming unsustainable for some retailers.”
Faced with the alternative of their tenants going out of business and a likely struggle to find a replacement, landlords have reluctantly approved other CVAs this year. But they’ve been irked by House of Fraser’s decision to go public with its plans in May without first consulting with them, according to the British Property Federation.
Without mentioning House of Fraser directly, the group said in a statement Thursday that some retailers are abusing the CVA process.
“Urgent action is required and we are calling on government today to undertake a review, so that we can restore the CVA process to its original purpose,” CEO Melanie Leech said.
The House of Fraser closings are set to include the company’s flagship store on London’s Oxford Street. The company will seek approval from its creditors on June 22. If the proposals are cleared, the stores are likely to close early next year.
House of Fraser’s 175 million pounds (Dh863m) of bonds due in 2020 have fallen 15 pence this year to a record-low 73 pence, according to data compiled by Bloomberg.
A CVA is sometimes merely a stay of execution. Department-store chain BHS, outdoor-gear retailer Blacks Leisure and sportswear merchant JJB Sports all collapsed in recent years despite carrying out CVAs. The latest woes among UK retailers follow the insolvency of Toys “R” Us’s UK unit and electronics retailer Maplin in February.