British-based retailer House of Fraser is set to close 31 of its 59 stores, but its Dundrum store in Dublin and its Victoria Square outlet in Belfast will survive the cull.
The company is implementing a restructuring plan that will affect 6,000 jobs - 2,000 House of Fraser employees and 4,000 concessions - in a bid to save the company.
The closures are part of a proposed Company Voluntary Arrangement. CVAs allow insolvent firms to continue trading while paying creditors over a fixed period.
The CVA, a legal process in the UK that requires landlords to agree to reduced rents or terminations of lease, is a condition for the sale of a controlling stake in the department store group to Hong Kong listed company C.banner, that also owns toy shop Hamleys and plans to inject £70 million of fresh capital into House of Fraser.
The stores scheduled for closure, which include the group’s Oxford Street store in London and many outlets in provincial cities in Britain’s north and midlands, will remain open until early in 2019.
Creditor meeting
The creditor meeting to approve the CVA will be held on June 22nd. Landlords have already signalled their disquiet with the proposal, because it does not impose losses on other creditors or shareholders.
In a statement, House of Fraser said without the restructuring plan, the company did not have a viable future.
The restructuring process will also see the company relocate its head office in Baker Street and its Granite House office in Glasgow to new locations to help cut costs.
The planned closures follow last month’s announcement that another Chinese group, retailer C.banner, had agreed to become the majority owner with a 51 per cent stake, with Nanjing Cenbest remaining a minority shareholder. Mike Ashley’s Sports Direct chain owns an 11 per cent stake in the retailer.
House of Fraser said it had held constructive initial discussions with landlords and other key stakeholders.
"The retail industry is undergoing fundamental change and House of Fraser urgently needs to adapt to this fast-changing landscape in order to give it a future and allow it to thrive," said Frank Slevin, chairman of House of Fraser.
“Our legacy store estate has created an unsustainable cost base, which without restructuring, presents an existential threat to the business. “So whilst closing stores is a very difficult decision, especially given the length of relationship House of Fraser has with all its locations, there should be no doubt that it is absolutely necessary if we are to continue to trade and be competitive.”
The use of CVAs have been criticised by landlords in the UK. Speaking on BBC Radio 4's Today programme on Thursday morning, Ian Fletcher of the British Property Federation said: "The only way to challenge [a CVA application] at the moment is to go to court - that's not a particularly appetising proposition for anybody.
“These are big decisions, they involve billions of pounds and they involve people’s jobs and at the moment the only person that is the judge and jury on those is the insolvency practitioner so there is a group already that exists called the pre-pack panel, they could have a role in terms of giving a second opinion.”
Those affected by the store closures have already been informed. Among those set to close are the company's Oxford Street store in London and stores in Birmingham and Bournemouth.
The House of Fraser store in Dundrum is a separate legal entity. – Additional reporting: PA/Financial Times Service/Reuters
