I once spent a long time looking at House of Fraser as an acquisition.

The top six stores, including Manchester, Glasgow and Birmingham, would become Selfridges stores.

Then there was a tier of 20 or so stores (including Bath, Guildford, Richmond) located in good catchment areas that would be branded Frasers, selling mainly third-party brands, focusing on beauty and fashion – as an alternative to the then more private-label-orientated Debenhams, and the home bias of John Lewis.

The remaining 30 or so stores would be closed and sold to property developers.

That was 20 years ago in 1998. Even then we couldn’t make the numbers work.

“If you don’t keep the retail space fresh, interesting and smart, customers go elsewhere. If you don’t make the capital investment, sales come under pressure”

During that project I visited all of the 56 stores across the country – the store estate was not in good shape, retail standards were low and there were huge disparities in the quality of the stores; hence confusion about what the brand stood for.

Department stores require significant continuing capital investment, as Harrods and Selfridges demonstrate. Often they are located in old buildings where several million pounds can be spent without the customer noticing a thing.

If you don’t keep the retail space fresh, interesting and smart, customers go elsewhere. If you don’t make the capital investment, sales come under pressure, which makes the store less profitable, so it generates less cash and there isn’t then finance available for future capital investments – and so the downward spiral continues.

The store that I will always remember from my travels back then, an extreme example admittedly, was the appropriately named Binns of Middlesbrough – six floors of trading, no escalators, two lifts and last refitted in the 1960s.

I’m convinced that Mrs Slocombe worked there! (Those under the age of 50 may need to Google “Mrs Slocombe”.) This store might well have generated cash, but it did nothing for the brand and, given the economics for the catchment area, would have struggled to justify any future investment.

Outdated estate

In 1998, House of Fraser had two stores in the West End: the elegant building occupied by Dickens & Jones on Regent Street, which was architecturally perfect for department store retailing, with large, open floor-plates and high ceilings, but has since closed; and DH Evans on Oxford Street.

The Oxford Street store still suffers today from having the escalators located in the wrong place as they are on one side of the building, hidden from view, when they should be in the centre of the floor-plate with a decent-sized atrium.

From the ground floor as you enter the store you would then have a sense of all the trading floors above you. Interestingly, Oxford Street is now scheduled for closure, which is a huge shame given its location and footfall. That decision begs the question: if you can’t make money here, where will you?

“While the historical lack of development of the store estate may provide some of the backdrop to the company’s current predicament, it isn’t the whole story”

While the historical lack of development of the store estate may provide some of the backdrop to the company’s current predicament, it isn’t the whole story.

Online shopping has since emerged and, for many established retailers, particularly department stores, this isn’t bringing additional sales – just a transfer from offline to online. As a result, more stores are becoming unprofitable.

In the case of these large-space retailers – House of Fraser, Debenhams, Marks & Spencer – downsizing the store estate is very difficult as there aren’t many alternative retail tenants for the building.

Retail businesses achieve significant profit growth when they are rolling out the store estate, as each additional store with a positive contribution goes straight to the bottom line.

However, putting this process in reverse is extremely painful, as a central overhead that is currently sized to support an estate of 59 stores is very difficult to reduce to a slimmed-down version for 28 stores.

In the midst of all this turmoil and drama affecting landlords, suppliers and customers, we should also remember the employees who work loyally and diligently for House of Fraser and its concessions. It’s not their fault.