House of Fraser does not expect substantial growth this year due to the volatility of the market, its executive chairman, Frank Slevin, said today.
Like-for-like sales at House of Fraser edged up 0.9% in the year to 28 January, while profit before tax and exceptional items jumped 161% to £3.4m for the year.
Slevin said the first three quarters of the year were “extremely challenging” but strong Christmas trade between November and January drove sales and cost savings and “significantly lower” interest rates boosted profitability at the firm.
Despite the positive figures, Slevin told Drapers: “I’m not predicting a stellar year. We’re aiming for the same level as this year in terms of sales and profitability.
“The volatility of the market in 2016 carried on into this year and February wasn’t as good as I would have liked. I’m not sure why this is – perhaps it’s because people pay their Christmas credit card bills off in February. March on the other hand was very good, but April is increasingly becoming two weeks’ trade instead of four.
”For the rest of this year I have a degree of caution. Brexit negotiations are going on in silence so that hasn’t caused us problems yet [in terms of consumer confidence] but that could all change.”
The retailer said there had been “strong growth” of 3.6% on branded products, while house brands fell by 2.1%. Concession sales remained flat.
Beauty was up 4.1% and womenswear sales dropped 0.6% year on year. Sales were up in all other categories.
As first revealed by Drapers in September, HoF is dropping some of the own brands in its womenswear division to focus efforts on growing the better performing labels.
In March, it announced plans to cut between 30 and 40 third-party womenswear brand partners from its stores as it reshapes its portfolio with a clearer focus on the core customer.
“The ones we’re cutting have no resonance with customers,” said Slevin. “We won’t [lose] sales as we will grow the ones that are working by investing in quality and depth.”
The new womenswear offer will be unveiled this autumn, but HoF said the full benefit would not be realised until 2019.
On branded fashion product, Slevin said the strategy remained the same – “to offer shoppers the best brands available at affordable prices” – but a greater focus on athleisure labels this spring is working well for the group.
HoF will change its buying structure this year to introduce more frequent drops into store. This strategy is being overseen by Maria Hollins, executive director of product and trading, who joined the business from Asos in March last year.
Currently HoF operates on the traditional model of two buys a year, but it will spread this out across the season over the next 18 months.
Slevin said the current model isn’t efficient: “It creates issues in the warehouse as it is packed, there are working capital issues as everyone needs to be paid at the same time and we aren’t delivering newness throughout the season in stores. We want to bring product in on a more frequent basis. We’ll never get to a drop every month but we will spread it out over a longer timeframe.”
The group said its first Chinese store, which opened in Nanjing in December, was proving to be “an excellent test bed” for the retailer in the Asian market. CFO Colin Elliot said he was “not unhappy” with the store’s performance but added that it was too early to give any financial figures.
The department store group expects to announce the appointment of its new CEO by the end of the month following the departure of Nigel Oddy who handed in his resignation in November.