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House of Fraser reports record profit levels

House of Fraser has reported its highest ever gross profits and record level like-for-like sales, with house brands being singled out for driving much of its growth.  

The fashion-focused department store has reported gross profits of £403.8m for the year to January 26, while like-for-likes excluding VAT rose 3.3% to £1.2bn. Adjusted EBITDA was up 4.3% to £61.1m.

Ecommerce soared 53% over the period, and now makes up 10.9% of its sales. House brands now represent 14% of HoF’s total sales, rising 4% over the 12 months.

The business also drove down net debt from £163.4m last year to £157.2m now. The pension deficit was also reduced, by just over £38m to £46.9m.

HoF added that the “strong momentum” seen in the second half of last financial year has continued into the current trading period, with the first quarter to April 27 seeing sales up 4.8%.

A company statement noted that improvements made to the website had increased conversion rates, as had the expanded product offering and better delivery options.

House brand Label Lab, Linea Weekend and Howick menswear were highlighted as delivering strong performance over the year.

Chief executive John King noted this part of the business “grew significantly in the second half of the year and this trend has accelerated” into 2013.

He added: “We have strengthened our relationships with our brand partners and continued our collaborative approach to improving store environments and selectively refurbishing stores which have generated sales growth and positive returns.”

Chairman Don McCarthy added: “General market conditions continued to be challenging, particularly in the first half of the year, and accordingly we were pleased to have delivered an improvement in group profitability and a reduction in net debt.”

He sounded a warning about economic conditions for the coming year, saying it was “difficult to assess when market conditions will improve”.

However McCarthy said he was “confident” HoF would continue to grow “for the forseeable future”.

The strong results may see renewed interest in the business as a potential acquisition target. Earlier this month reports emerged that the Qatari Investment Authority, which owns Harrods, was eyeing the department store.

This followed months of speculation that Sports Direct’s Mike Ashley was interested in acquiring a majority stake, although it is thought he has since cooled on the idea.

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