House of Fraser closures loom as Ashley’s Sports Direct takes hit

Sports Direct, controlled by controversial tycoon Mike Ashley, said House of Fraser store closures are likely in the next 12 months after it lost £54.6m.

The retailer reported a 6% fall in group underlying EBITDA to £287.8m on sales 10.2% up to £3.7bn in the year to April 28, delayed results showed.

In the delayed results, Ashley lashed out at the board and auditors of Debenhams and also questioned whether he made the right decision in buying House of Fraser out of administration in August 2018. 

The retailer said its acquisition of House of Fraser for £90m last year “has led to significant uncertainty as to the future profitability of the group a whole albeit not impacting the going concern assessment of the group”. It said that in the circumstances it would not provide a consensus profit figure for the new financial year.

Ashley lambasted House of Fraser’s former owners for leaving the department store chain with problems that “are nothing short of terminal in nature” and labelled ex-chairman Frank Slevin as the epitome of “City greed and excess”.

He added: “We have done as much as we could realistically do to save as many jobs and stores as possible, and indeed we appreciate many landlords and local authorities have worked hand in hand with us as we tried to do this.

“However, there are still a number of stores which are currently paying zero rent and that are still unprofitable and unfortunately this is not sustainable. We are continuing to review the longer-term portfolio and would expect the number of retained stores to reduce in the next 12 months.

“On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1, albeit we are trying very hard to turn the business around this will not be quick and it will not be easy.

“Even though we do believe there could be a bright future for House of Fraser, and indeed have publicised our Frasers vision which we are very excited about, if we had the gift of hindsight we might have made a different decision in August 2018.”

The retailer said: “Although we have put significant effort into integrating the business into the Sports Direct operational model, including its processes and KPIs, we are still some way from reaching an operating norm.

“We cannot yet confirm, or even predict, with enough material accuracy what the overall estate will look like in the near term, and this will depend on a combination of factors including brand allowances, current and projected store performance, and rental deals.

“To be able to invest in the estate, including experiential, we need to confirm the longer-term estate via freehold acquisitions and longer term leases. We believe this will help drive improved performance through greater brand allowances and increased footfall.”