House of Fraser has returned to profit for the first time in a decade after booking strong sales online and refinancing under its new Chinese owners.
The department store achieved pretax profits of £1.3m in the year to 30 January, compared to a £2.9m loss a year before, as sales rose 4.2% to £1.3bn. Online sales rose nearly 27% to represent nearly a fifth of the group’s total after the company improved its delivery services and website.
Meanwhile, the company has cut its annual interest bill by £5m a year after replacing high yield bonds with other cheaper debt after the 2014 acquisition by Sanpower, a Chinese conglomerate which is listed on the Shanghai stock exchange.
But Nigel Oddy, chief executive, said: “This turnaround has been driven by sales. We have seen strong sales across all routes to market and the key has been house brands which deliver higher profit margin.”
He said House of Fraser’s online business had now reached a scale where it was becoming more economic. The company will launch is first overseas website in Australia in the next few weeks, as Oddy said shoppers from that country were the biggest spenders on its UK site.
The company also plans to invest £40m in the year ahead in further improvements to its UK website and IT infrastructure as well as the refurbishment of at least four stores. Six stores, including Huddersfield, Lincoln and Leeds, were refurbished last autumn and Oddy said that work would help boost sales in the year ahead.
He said the company was “cautiously optimistic” about trading. But Oddy added: “It’s been a challenging trading environment since the turn of the year. What’s been good is this slightly more spring like weather and that’s helped us. But there’s a general lack of confidence among consumers in the UK at the moment. Partly that’s about Brexit and general economic uncertainty and what’s happening with exchange rates. As long as customers feel an element of uncertainty we know from experience that customers don’t tend to shop quite as much.”
House of Fraser’s new owners also plan to expand the brand across China. The first store will open in Nanjing later this year and a second store is planned for Xuzhou next year.
“We will be bringing a quintessentially British department store with western brands,” said Oddy.
At present House of Fraser has just one overseas store – in Abu Dhabi. It has now appointed an international director to expand further in the Middle East and other countries beyond China.
