John King is making strides towards realising his ambition of turning House of Fraser into a UK Nordstrom. He talks to Amy Shields

House of Fraser is putting its house in order. Last week, the retailer unveiled its biggest and most ambitious store to date and its first opening since being taken over in a£351 million Baugur-backed deal a year ago.

The showcase 200,000 sq ft Belfast shop, described by House of Fraser chief executive John King as “a shining testament to world-class retailing”, represents a milestone in his mission to turn the department store group into the Nordstrom of the UK (RW, February 2, 2007).

Former Matalan boss King and chairman Don McCarthy have been instrumental in implementing a wide-reaching shake-up of the 61-store business that helped deliver a 2.4 per cent rise in like-for-likes in one of the most jittery Christmas trading periods for years.

Among the changes made, the retailer has culled its iconic prancing stag logo and streamlined management teams. King has also introduced a raft of top-end brands, kick-started the store revamps and signed supermodel Yasmin Le Bon to be the face of the company.

However, House of Fraser’s first year under Baugur ownership has not been without controversy. The retailer famously battled with some suppliers after it turned the screws on them by demanding they contribute more to its marketing.

But has the rebranding taken House of Fraser in the right direction? Does the new Belfast store and its buoyant Christmas trading mark the start of a golden period for the retailer? And what are the retailer’s strategic objectives for the year ahead?

“House of Fraser the brand has moved on from where it was, so it has an identity,” says King. “The brands and products we have been able to introduce have made it a more interesting place to shop.”

The five-floor Belfast store, which is the retailer’s largest and anchors the 800,000 sq ft Victoria Square development, includes the retailer’s first out-of-hours restaurant and more than 500 brands.

Own-labels Linea, Howick and Untold sit alongside exclusive Scandinavian brands such as Bruuns Bazaar and Sand, courtesy of Baugur’s Icelandic and Scandinavian connections. Debut brands include The White Company and Agent Provocateur and theatre – or “retailtainment”, as King puts it – is provided by the likes of Hamleys and the beauty brands.

The store also contains new shopfits from a raft of brands, some of which were left shaken by the introduction of tightened supplier terms last year. Under the new terms, suppliers have had to contribute to marketing costs and are granted a rebate based on good performance.

“It demonstrates House of Fraser fulfilling its side of the bargain to suppliers,” says King. The supplier demands are understood to have benefited the retailer by about£50 million, with a margin benefit of£7 million, although it is believed to have been reinvested in marking stock down before Christmas.

Return to calm

However, any grumbles largely appear to have now been addressed. One key supplier says: “We are absolutely happy. We had our doubts at the beginning, but House of Fraser is moving in the right direction.”

Another supplier adds: “If this approach to the look, feel and layout can be replicated across its portfolio, then it will certainly strengthen House of Fraser’s position in the department store sector.”

In the same document sent to suppliers outlining the changes in terms, King revealed aspirations to compete with Selfridges in terms of price and positioning. However, industry watchers warn that House of Fraser is implementing change against the backdrop of a challenging retail market – last week, rival and retail bellwether John Lewis warned of a tough year ahead – coupled with the ongoing decline of the department store business model.

Verdict chairman Richard Hyman says: “The decline doesn’t mean you can’t have a successful department store, but for a long time, House of Fraser was not sure who it was and what customer it was aiming for. This lack has been apparent in the body language of the store to customers.

“The thing about the house of brands approach is, whatever brands you put in, it is all about the house. House of Fraser itself has to have credibility and be an attractive destination. Just shoe-horning in brands is not enough.”

While there is some evidence the luxury end of the market can weather the economic storm, King is realistic. “It has got to be affordable luxury. There is room for all sorts of retail in the current market,” he says.

He adds that the refurbishment of stores in the past year has led to a 6 per cent rise in like-for-likes. The investment has touched 15 stores this year, with a similar amount to benefit over the next year.

The retailer has also ramped up its marketing, with Le Bon providing aspirational fashion credibility while avoiding alienating its broad customer base. A new ad campaign has been unveiled with the strapline “Temptation on every level”. It is expected she will appear in a House of Fraser TV campaign for Christmas.

King says that now the positioning is in place, it is essential to ensure customer service is top notch from the moment shoppers enter the store. “The glue in all of it is the people,” he says. “We all work well together. No one is afraid to speak. We don’t want to sit around and pontificate. I would want people to make a decision.”

The retailer has announced a new bonus scheme that could keep the smile on the faces of its 10,000 staff if they meet profit targets. “It is our view that there is no budget on creativity. Once you take over a business, there is a lot of talent that may have been frustrated and it’s my job to let them do their job,” explains King.

Can-do attitude

Director of womenswear, accessories and beauty June Lawlor says: “There is a very clear vision of what House of Fraser wants to stand for as a brand. We are rebadging the stores. We are much more focused on the brands. There is much more pace and drive. We are working together towards an overall handwriting to achieve our vision.”

Commercial director Colin Porter agrees. “There is a complete change of pace. There is a can-do attitude and suddenly lots of doors have opened to make the product offer more appealing, make customer service better and launch the web site – all the obvious things for a retailer to do,” he says. “All of those things were not possible at speed [before]. Having Baugur on board has given us the ability to do that.”

One former House of Fraser executive says that, while House of Fraser’s repositioning was in swing under the old management led by John Coleman and David Adams, Baugur’s clout helped them achieve it. “I don’t think there has been an enormous change, but the execution is different because of the Baugur balance sheet and most stores have been touched by investment,” he says.

The sources adds: “I do think that, within the difficult market, it will do quite well. House of Fraser is the only route to national distribution for those brands and it has got a position in the market.”

Hyman says that maintaining the correct balance of brands will be essential to its ongoing success. “I don’t think it could become a national Selfridges, but there is an appetite for quality branded products,” he says.

Likewise, Kaupthing analyst Matthew McEachran believes the variety of refits and shaking up of brands and concessions mix appears to be generating a result. “Whether the highest positioning might make it immune [to the challenging retail background] remains to be seen,” he says.

“It’s trying to intensify the space, but it is harder given the background. When Baugur bought it, it was already on a good upswing. They were gaining some traction and new momentum.”

Alongside a focus on the development of its own-labels combined with the introduction of more exclusive brands and concessions, the retailer will overhaul its womenswear and home departments by this time next year. It is also expected that there will be a few store closures alongside the openings that include High Wycombe, which opened this week, Bristol and Westfield London, set to open later this year, as well as two in the pipeline, in Dublin and Chester.

Hyman says: “There are a number of stores that didn’t make money and being publicly quoted made it difficult for them to close any.”

But what does King think the next year will hold? “We want to provide a premium shopping experience on a national basis,” says King. “We want to be the UK and Ireland’s premium department store destination.”

At the Belfast opening he promised: “There are going to be bigger and better things,” before adding: “You are all very welcome to our house.”