Today, House of Fraser revealed that it would be joining a legion of other retailers and launching a company voluntary arrangement (CVA).
The decision isn’t unusual in a market where there are many underperforming retailers paying big money to sit on high streets with falling footfall. But what is unusual is that it comes with strings attached.
The pair already have ties: they are “strategic partners” and House of Fraser chairman Frank Slevin also chairs Hamleys.
There is also thought to be a family connection tying the two groups together.
In order for C.banner to invest in House of Fraser, however, House of Fraser’s creditors will need to agree to a CVA.
“Retail Week understands that, of House of Fraser’s 59 stores, around 20 turn a healthy profit”
The CVA is expected to be launched early next month, but the department store group has not yet provided any details of how many stores will be affected.
There is no word on whether stores will be shut or whether it simply wants to pay less rent.
Retail Week understands that, of House of Fraser’s 59 stores, around 20 turn a healthy profit. So, for a CVA to stand any chance of being effective, the group may need to swing the axe on its estate.
Then there’s the problem of CVAs frequently not working.
The past several years has brought a spate of them: BHS, JJB Sports, Mamas & Papas, Blacks, Beales, shoe group Stylo and Toys R Us. Of that list, only Beales and Mamas & Papas didn’t end up in administration subsequently.
Lack of strategy
“CVAs are not always successful in protecting businesses from entering into administration and total closure,” Menzies business recovery partner Simon Underwood says.
“In order to determine whether this strategy is right for them, retailers should ask themselves why they are experiencing financial difficulties.
“With well-known retail and casual dining brands struggling, the stark message to all businesses with an interest in the high street is to have a robust plan.”
That robust plan is something House of Fraser cannot execute at present. Although boss Alex Williamson, who joined the retailer less than a year ago, is by all accounts full of energy and enthusiasm and well-regarded in the business, little has happened since his arrival – cash is too tight.
“In order to determine whether this strategy is right for them, retailers should ask themselves why they are experiencing financial difficulties”
He has carried on executing plans already in place, outlined by Slevin, to cut house brands and up the chain’s experiential credentials. However, really transforming the business remains nothing more than an ambition at present.
It is understood that Williamson is at present purposely running House of Fraser on a list of action points, rather than having had the opportunity yet to implement a turnaround and transformation strategy.
The market’s fast-changing nature makes a by-the-seat-of-your-pants management style understandable, but it’s easy to theorise that it could also be the only option when dealing with an unpredictable owner in Sanpower, which has promised much but apparently delivered little.
But if C.banner is a supportive and collaborative majority shareholder – and the CVA is drastic enough – then HoF’s fortunes may finally change.