• House of Fraser EBITDA slid to £1.1m in its half year to July 30
  • Total sales came in line with the prior year “despite very challenging retail environment”
  • The department store retailer unveiled a new concession partnership with Hamleys

House of Fraser has warned of “subdued trading” ahead as its profits slipped during a “volatile” and “challenging” first half.

The department store chain, which is owned by China’s Sanpower Group, reported flat total sales of £573.5m in the 26 weeks to July 30. Like-for-likes rose 0.9%.

EBITDA slid to £1.1m from £9.2m the prior year. The retailer blamed £3.9m of that reduction on the expiry of a financial services contract in June last year. 

“We have, like many of our peers, experienced an extremely volatile trading environment since the final quarter of fiscal year 2016, and we expect this uncertain economic situation to remain for some time,” said chief executive Nigel Oddy.

Earlier this month, rival John Lewis reported a 14.7% drop in first-half pre-tax profits, blaming turbulent trading conditions. 

Oddy added: “Despite these challenging market conditions, we are pleased to have delivered like-for-like sales growth, improved cash and gross margin and increased gross profit in the first half.”  

House of Fraser’s online sales jumped 17.8% on a like-for-like basis, and now represent 20.7% of total sales.

Its homewares department was the strongest performer, growing sales 4.5% during the six-month period ended July 30.

Hamleys concessions

House of Fraser also unveiled plans to launch a new concession partnership with Hamleys.

It will bring the toy shop into six of its stores in the second half of the year, as well as continuing with its refurbishment plans.

Oddy said: “As we continuously look at ways of enhancing our leading retail proposition, we are excited to welcome Hamleys as a new concession partner. The brand will be launched in six of our stores in time for Christmas, adding to the list of exciting new brands we’ve added this year.”

Current trading

The retailer said sales are down 2% in the last eight weeks, compared with the same period last year, as a result of “further challenging trading conditions and low consumer confidence, as seen across the retail sector”.

It said trading continues to be “volatile”, and has been further impacted by the disruption caused by refurbishment work at five of its stores.

It added, however, that while it expects to see “subdued trading reported for Q3”, it is “well positioned to capitalise on the traditionally active final quarter of the financial year, particularly around the all-important Black Friday and Christmas trading period”.

Oddy said: “We are confident that we are in a strong position to maximise trading in the second half, in particular during the important Christmas trading period, supported by new brand launches and shop-fits, the completion of the five ongoing store refurbishments, as well as the strong management team we now have in place.”

House of Fraser added that it has made “good progress” in China, with the first store set to open as planned in late 2016.