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Discounting hits sales and profits at HoF

House of Fraser’s like-for-like sales and profits fell in the first half of the year as a result of “significantly disrupted” online sales following a replatforming of the website and heavy discounting of its legacy in-house womenswear brands.

In the 26 weeks to 29 July like-for-like sales dropped 5.2% compared with 2016. Online sales also dropped during the period by 9.8%.

The retailer made an adjusted EBITDA loss of £8.6m for the six months compared with a £900,000 EBITDA loss in 2016.

Gross profit fell to £196.9m, down from £207.2m.

HoF launched the £25m replatforming of its online business in April. The firm said the new system was working well and “good progress” had been made to recover sales volume. The group expects to be trading normally by the beginning of the final quarter of the year.

For autumn 17 five existing in house HoF womenswear brands were dropped and the remaining four were relaunched. The department store group said the collections had been well received so far, and revenues were “exceeding expectations”.

During the half HoF launched an £18m investment programme in its distribution centre to increase capacity, drive operational efficiencies and improve profitability. The retailer expects to deliver £5m of efficiency savings in the second half of the year, rising to a run rate benefit of £15m of efficiency savings by the time the project completes in mid-2018.

House of Fraser opened a new store for the first time in nine years in Rushden Lakes on 24 August. In July, the group closed the loss-making Leicester store and surrendered the lease to the landlord, and also announced in August 2017 the decision to exit the Aylesbury store.

Alex Williamson, CEO of HoF, said: “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. Whether it be refinancing the business, the investment of over £100m 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. With the support of Sanpower, we are building the right foundations that position us well to deliver on our ambitions for sustainable profit growth.”

 

 

 

Readers' comments (1)

  • Problem HOF has created is that it is on sale so often, that they created an environment where the consumer will only shop when they are on sale. Bad management.

    HOF is a discounter, masquerading as a so-called 'Premium' outfit.

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