Sports Direct has raised the stakes in negotiations with House of Fraser store owners, warning it would be the fault of “greedy landlords” if hundreds of retail jobs are lost as a result of looming closures.
The sportswear retailer, controlled by Mike Ashley, snapped up the stricken department store chain for £90m earlier this month but is yet to finalise how many of its 59 stores will close.
Retailers that have gone bust 2017-18
Toys R Us: 180 stores employing 3,000 staff, collapsed 28 February. Owes £15m in VAT, due by 1 March.
Maplin: 200 electronics and gadget stores, founded 1972, also failed on 28 February.
Warren Evans: bedmaker went into administration earlier in February.
East: fashion brand with nearly 50 outlets folded in January.
Juice Corp: business behind brands including Elizabeth Emanuel and Joe Bloggs went under in January.
Multiyork: furniture chain with 50 stores went into administration in November.
Feather & Black: bedroom furniture and bedding specialist with 25 outlets fell into administration in November.
Retailers under pressure
New Look has debts of more than £1bn and has lost some of its credit insurance cover, which protects suppliers if a retailer goes bust. In the 10 months to Christmas, sales fell 11% and losses hit £123m. The company intends to close 60 stores and change its fashion ranges, but faces a struggle to win back young shoppers.
House of Fraser's Chinese owner, Sanpower, had to stump up £25m to see the store through Christmas and its debt is rated as junk. The retailer is attempting to reduce the size of its stores by 30% and has asked landlords to cut rents.
Debenhams, a 178-store chain that is more than 200 years old, is axing one in four of its managers and considering closures to cut costs. It has warned that profits have been hit by lower than expected sales, with profit margins also down as a result of having to cut prices to match rivals.
Under a restructuring plan drawn up by the previous owners of House of Fraser’s 31 stores were scheduled to shut, but Ashley pledged to reduce the number of closures to a dozen, partly by turning over floors of larger shops to Sports Direct or his upmarket Flannels chain.
Sports Direct has formally reversed plans to shut the House of Fraser flagship on Oxford Street in central London as well as a number of other branches including Plymouth, Darlington and Middlesbrough. But a spokesman told the Press Association on Tuesday that time was running out for deals to be struck.
“Some landlords are being very collaborative in order to give us a chance at turning the business around, giving House of Fraser a lifeline and saving hundreds of jobs,” said the House of Fraser spokesman. “However, some greedy landlords would rather see the stores close than help save the jobs of hundreds of people. We will continue to try and convince these landlords but ultimately time is running out. Some closures will be announced.”
The relationship between retailers and property firms has been tested to its limits this year by a spate of administrations and company voluntary arrangements (CVAs), an insolvency procedure used to close unprofitable stores and cut rent bills.
Carpetright, Mothercare and New Look have been among the struggling household names to have used CVAs, with Homebase the latest retailer to propose one. On Friday, the DIY chain’s creditors will vote on a plan that would result in 42 store closures.
Melanie Leech, the chief executive of the British Property Federation, said the negotiations between House of Fraser and its landlords were a two-party process and “one party simply can’t cry ‘unfair’ … when it doesn’t get what it wants”.
It is understood that some landlords have been reluctant to agree meagre proposals tabled by Sports Direct, which have included rent-free deals where only occupational costs such as business rates would be covered.
“Many property owners are investing in and managing property on behalf of pensioners’ savings and depend on occupiers being able to pay rent,” said Leech.
“The long-term health of our high streets also depends on this. There will be a range of factors to consider on a store-by-store basis but what property owners won’t be doing is simply leaving stores empty for the sake of it, that would be in no one’s interests.”
