Time is running out for House of Fraser to secure “vital funding” to maintain the 169-year-old department store chain’s place on the high street, albeit with a reduced footprint.
HoF is due to start making payments to its concession partners from 15 August onwards, but this week its future still hung in the balance as it sought to negotiate a deal for investment.
Edinburgh Woollen Mill Group owner Philip Day is understood to be in discussions with the retailer, as are turnaround firms including Alteri Investors and Hilco Capital. However, sources told Drapers that Sports Direct owner Mike Ashley’s interest had cooled.
One menswear industry insider said: “I’d be surprised if Philip Day doesn’t do a deal, as there is no question he has been close to that business over the last few months.”
Another added: “Time is running out and it is now a question of who has the cash and can quickly stabilise the situation. There are now only 28 stores left on reduced rents, which gives it the best chance it will have.
“It needs a retailer who knows what they are doing so we are supportive [of Philip Day’s intervention], it would be lot more reassuring than some of the others, but he needs to act fast.”
The retailer reached an out-of-court settlement with a group of landlords that had challenged its company voluntary arrangement (CVA) at the end of last week, clearing the way for planned store closures.
The group of landlords had filed petitions to Scottish courts last month after HoF proposed to close 31 of its 59 stores as part of its CVA restructuring.
The details of the settlement were not disclosed.
A spokeswoman for the supervisors of the House of Fraser CVA said: “This commercial settlement has been reached to avoid the costs of litigation and allows the companies to continue its investment process without the CVAs being subject to the risk of further legal proceedings.”
Despite the CVA getting the green light, independent retail consultant Richard Hyman said he doubted whether HoF would be able to secure a rescue deal that would allow it to continue in any recognisable form: “Rescuing a business like HoF requires a plan to immediately sell 50%-70% more product than it is now,” he said. “It is more likely that someone will dive in looking for an opportunity to take control of the assets without the attached liabilities.”
One source close to HoF questioned whether securing the required capital would be enough to save the business and enable it to thrive: “The biggest challenge HoF has, after getting a cash injection, is keeping the brand partners on side and those all-important relationships.”
Concession partners told Drapers this week that they were still anxiously waiting to hear its fate, which could have significant ramifications for brands and suppliers throughout the industry.
The source said: “For some brand partners, HoF accounts for a large proportion their sales, so if a deal cannot be secured this will be huge.”
Around half of HoF’s sales come from concessions – although rises to 70% of womenswear – 35% is from wholesale and 15% own brand.
In June, HoF chief product and trading officer David Walker-Smith pledged to focus on the “best selection” of contemporary brands, exclusivity and an agile response to trends as the department store battles to keep with consumers. The retailer opted to shift focus away from its own label to a branded offer, at a time when department store rival John Lewis is doing the reverse.
HoF declined to comment.