House of Fraser’s own brand offer helped drive an increase in full year profits as private label becomes an increasingly critical battleground for department stores.
House of Fraser executive chairman Don McCarthy told Retail Week: “We’re building our own brands. It’s important to give us a point of difference. We’re going to continue to develop them and look for new opportunities. We’ve got to get to a point where they are a major part of our business.”
Own brands have been a central focus across the major department store groups as they bid to differentiate from rivals and preserve margins.
Verdict senior retail analyst Honor Westnedge said: “Branded goods is increasingly competitive. The rise of online means that shoppers can go to another retailer which has the same brands at a lower price or a discount. Own brands give shoppers a reason to come to store.”
Debenhams has put its Designers at Debenhams ranges at the heart of its growth strategy and aims to grow its sales contribution to £750m in the medium term, from its current £530m.
Meanwhile John Lewis has invested to bolster both its own brand and exclusive product. Last year it launched its biggest ever private label, its home range House by John Lewis, and teamed up with designer Alice Temperley to launch an exclusive fashion range.
House of Fraser’s own brand sales, which represent 14% of overall revenue, rose 4% over the year, with own label profit up 5%. Chief executive John King said that house brand sales “grew significantly” in the second half and have accelerated during the first quarter of its current year.
New launches and range extensions helped drive the own brand uplift with Label Lab, Linea Weekend, Biba and Howick menswear performing particularly well, according to the retailer.
However, Westnedge said that House of Fraser has some work to do to match Debenhams’ strong own brand offer. She said: “They don’t have the same market presence as Debenhams’ brands. They need to increase awareness.”
McCarthy also said the retailer’s upmarket repositioning had helped it weather the economic storm. He said it was difficult for those operating at the lower end of the market where discounting is prevalent.
House of Fraser like-for-likes increased 3.3% in the year to January 26 as adjusted EBITDA increased 4.3% to £61.1m.,Revenue reached £1.2bn.The department store’s sales growth has improved in its current year, with like-for-likes up 4.8% in the 13 weeks to April 27.
House of Fraser’s online business continued to be its star performer over the year, with sales soaring 53%, against a budgeted 30% rise, according to McCarthy.
Sales via the channel have accelerated in its current year, rocketing 62%. The retailer expects online to grow to £230m in its current year from £130.8m.