House of Fraser sets its sights on overseas expansion drive

Speaking as the group revealed a 16.3% increase in first-half retail EBITDA to £10.7m, chief executive John King said the retailer was planning to open stores overseas on a franchise basis as part of its next three-year-plan.

He said: “It is something that we think will be back end of year two. We are in discussions with a couple of parties about taking our Westfield London concept to other countries.”

King declined to comment on where the stores might be located, but chairman Don McCarthy said the Middle East might be one region where the model could work, giving greater exposure to House of Fraser’s private label house brands. The retailer also plans to open up its website to 65 markets in November.

The international plans tie in with a push by House of Fraser to drive margin by upping the proportion of its house brands – which include Linea, Therapy and Howick – in the sales mix from below 10% now to about 30% in the future.

Over the 26 weeks to July 25, like-for-like sales fell 2.7%, but the performance improved in the second quarter when they rose 0.5%. In the six weeks since the end of the period, like-for-likes climbed 1.3%. McCarthy said that unlike last year, when the collapse of Lehman Brothers had led to double-digit falls in like-for-likes, there were no plans to go into full Sale before Christmas this year.

McCarthy said that net debt had been reduced by £21m over the period and is £100m ahead of plan. But he said there was no timescale for the retailer’s private equity backers to make their exit and no plans to list the company.

The retailer was hit by the collapse of backers Baugur and FL Group last year. Their holdings of which are now controlled by Landsbanki and Glitnir, but McCarthy said
neither had any intention of selling their stakes.

McCarthy said: “The Icelandic banks have sold no assets. We have had no one knocking on our door. They are only going to sell when they get a reasonable value. They are in for the long term.”