Store closures on cards as part of House of Fraser rescue package

Troubled retailer House of Fraser has come up with a rescue package aimed at saving the company from collapse.

The firm, which has eight stores in the West Midlands, is to enter into a Company Voluntary Arrangement in June with store closures expected to follow by the end of the year.

And as part of the package international retailer C banner is to become a majority shareholder in House of Fraser with 51% stake.

The conditions meant that House of Fraser will restructure its store portfolio – which is expected to lead to closures of under performing stores. The move has put hundreds of jobs at risk.

Industry experts suggested House of Fraser would have to consider closing at least 20 of its 59 stores to stay afloat.

The retailer’s West Midlands stores are in Birmingham, Leamington Spa, Shrewsbury, Sutton Coldfield, Telford, Worcester, plus Beatties stores in Solihull and Wolverhampton.

As well as acquiring the existing shares, C.banner will also subscribe for new shares in House of Fraser to provide fresh capital for the business.

C.banner owns extensive retail operations and assets including the iconic toy store Hamleys.

Existing shareholder, Nanjing Cenbest, part of the Sanpower Group, will remain a significant minority shareholder in House of Fraser.

House of Fraser intends to launch a formal CVA proposal around the beginning of June.

Pending creditor approval, the store restructuring is expected to conclude early next year.

Frank Slevin, chairman of House of Fraser, said: “C.banner’s acquisition of 51% of House of Fraser, together with the new capital and restructuring, represents a step to securing House of Fraser’s long-term future.

“With the support of Nanjing Cenbest and Sanpower, Alex Williamson and his team have made substantial progress on our transformation journey.

“However, we need to go further and faster if we are to confront the seismic shifts in the retail industry.”

He added: “There is a need to create a leaner business that better serves the rapidly changing behaviours of a customer base which increasingly shops channel agnostically.

“House of Fraser’s future will depend on creating the right portfolio of stores that are the right size and in the right location.

“C.banner’s investment is a vote of confidence in our prospects. We also know that if we are to deliver a sustainable, long-term business then we need to make difficult decisions about our underperforming legacy stores.

“I am all too aware that this creates uncertainty for my colleagues in the business and so we will be transparent with them throughout the process.

“These measures are essential to ensure that House of Fraser remains an iconic department store group for many years to come.”

The handling of the announcement has been criticised by the British Property Federation, which represents landlords.

Ian Fletcher, director of real estate policy at the organisation, said: “Announcing the CVA via a statement on new investment, whilst helpful to the overall continuation of the business, is highly insensitive when you are asking property investors to absorb large losses.

“We think any discussions on this CVA will therefore be awkward and any support for the CVA given grudgingly.”