House of Fraser’s Chinese owner is in “advanced talks” to sell a controlling stake in the troubled department store chain.
The Nanjing Xinjiekou Department Store Co., which owns 89% of HoF, is preparing to sell a 51% stake to a Chinese tourism development company, Wuji Wenhua.
It is understood that Nanjing Xinjiejou will retain a 38% stake in the retailer. Nanjing Xinjiekou, a subsidiary of Sanpower Group, originally bought its 89% stake in HoF in 2014. The remaining 11% is owned by Mike Ashley.
A spokeswoman for HoF said: “This will have no impact on the day-to-day operations or strategic development of the House of Fraser business in the UK and Ireland. It is business as usual.”
In a statement Nanjing Xinjiekou said: “We believe that Wuji Wenhua can be a strong strategic equity partner as they possess vast experience in the leisure sector and have access to a large network of travellers. This additional partnership will help House of Fraser to further internationalise its brand to reach out to an increasingly large international consumer base.
“We are supportive of the excellent leadership team at House of Fraser in its plans to transform the House of Fraser brand and make it a New Commerce leader in this new century.”
A source familiar with the situation questioned what impact the move would have on HoF’s balance sheet: “If the funds [from Nanjing Xinjiekou’s stake sale] are going back into HoF to secure its future that is great news, but we will have to wait and see. A lot of people are very worried about the debt and falling EBITDA. The business needs substantial investment to get it into a good financial position.”
One retail analyst described the transaction as being a “rearrangement of deck chairs”. He observed: “It is not clear what a change in ownership will achieve, especially in this market climate. House of Fraser needs to be rebuilt. It would take a vast amount of money to rebuild a department store business that has had its day. Who would do that in this market climate?”
A supplier to HoF added he was “very concerned”. “It is certainly not what the staff need right now, when they are in the middle of turning things around. It is very worrying, I hope it will be alright.”
Another supplier said while he was surprised by the move be wasn’t currently “overly worried”: “I always thought they would sell to [Mike] Ashley or Philip Day. We will have to see what happens but I’m not overly concerned at this stage.”
HoF launched in the Chinese market in January 2017 with its inaugural store in Nanjing, in Jiangsu province. At the time the business told Drapers it planned to open 30 stores in Greater China by 2020. A second Chinese store opened in Xuzhou last September.
In the department store’s most recent results, in-store sales for the six weeks to 23 December fell by 2.9%, with online sales down 7.5%. HoF made savings of £10m in 2017, and said “good progress” has been made in securing a further £16m in savings for 2018.
In January the department store chain had supplier credit insurance withdrawn from one provider. It also hired Rothschild to refinance £225m of its £390m debt package and is seeking rent reductions from landlords.
New chief executive Alex Williamson has been building his top team since his arrival in August. His latest recruit is former managing director of Fenwick’s Bond Street flagship, David Walker-Smith, who is taking on the role of chief product and trading officer.