House of Fraser swings to profit after a decade

Highland Group Holdings, the parent company of House of Fraser has said that the company has returned to profitability after almost a decade. The UK and Ireland’s department store group reported 4.2 percent rise in like-for-like sales for 52 weeks to January 30, 2016. Gross profit of 484.1 million pounds (689 million dollars), up 23.9 million pounds (34 million dollars) represented an increase of 5.2 percent on the prior year. Profit before tax before exceptional items was 1.3 million pounds (1.8 million dollars) and adjusted EBITDA increased by 3 percent to 66.3 million pounds (94.3 million dollars) or by 5.2 percent on a like-for-like basis.

“House of Fraser is pleased to report positive sales and margin growth over the full year, delivering the first profit before tax in 10 years. This was driven by continued progress across both our online and bricks and mortar stores, despite the volatile trading environment in the final quarter of fiscal year 2016. We have continued to invest in our business throughout the year, strengthening our multichannel proposition and enhancing our store environments with six extensive store refurbishments completed in the year. This investment will continue in fiscal year 2017 when we plan to refurbish further stores and continue to develop our IT and ecommerce capabilities,” said Nigel Oddy, CEO of House of Fraser.

Financial and operational highlights

The company reported continued growth in online sales excluding VAT of 26.8 percent on a like-for-like 52 week basis, representing 18.9 percent of total sales, while brick and mortar store sales increased 0.1 percent.

Sales in all categories and routes to market increased on a like-for-like 52 week basis. House brands and branded sales increased 4 percent and 6.7 percent respectively adjusting for the effects of the transfer of House Brand furniture to Concession last year, and the exit of House Brand lingerie. Menswear and accessories segment sales were up 8.5 percent and 4.6 percent.

The company made further enhancements to the Group’s website to enable the launch of a new Australian website in late April 2016 and also improved Buy & Collect areas in 17 stores. House of Fraser continued investment in enhancing the Group’s store portfolio including six extensive store refurbishments completed in the year at Huddersfield, Lincoln, Metro Centre, City, Bluewater and Leeds. It will develop a new shopping centre in Rushden Lakes in Northamptonshire in spring 2017.

Continuing progress on expansion plans in China, through House of Fraser Group, the first store will be opened in late 2016.

Current trading update

The company said that opening weeks of the first quarter of fiscal 2017 were impacted by challenging trading conditions, as seen across the retail sector, with sales for the first ten weeks to April 9, 2016 in line with last year. The Group remains cautiously optimistic for the remainder of the financial year.

“Looking ahead, whilst mindful of ongoing uncertainty around the EU referendum and the challenging market conditions experienced across the retail industry since the beginning of 2016, we remain cautiously optimistic and believe we are well positioned to deliver further growth in the year ahead,” added Oddy.

New appointments announced during the year

House of Fraser announced a number of new appointments, further strengthening the management team, as the business continues its growth in the UK and internationally. As announced in March 2016, Maria Hollins has been appointed to the newly-created role of Executive Director, Buying & Design, effective from May 9, 2016, and will be overseeing all of the buying & design functions across the business.

House of Fraser also appointed Dorothy Maxwell as Head of Sustainability, with the remit to enhance its corporate sustainability commitments and values and embed them in the strategy and operations of the business. John Kane joined House of Fraser in September 2015 as Regional Director of International Development with the remit to drive House of Fraser’s international ambitions into the Middle East and explore additional opportunities overseas, beyond the Chinese market.

As part of its objectives to build a sustainable business with robust Corporate Governance structures in place, in line with industry best practice, House of Fraser has appointed three Independent Non-Executive Directors to the Board of House of Fraser Group. They are Sir Martin Davidson, Patrick Paul and Charles Li.