House of Fraser results mix good news with bad as retail stays volatile
Good news: House of Fraser profits rose fast in the year to January 28. Any bad news? Well, the company warned that trading is still volatile, overall sales were flat and comparable sales edged up a tiny 0.9%.
Clearly there’s plenty of work still to do, but the company is taking an upbeat stance this week, emphasising the positives in its results announcement.
So, let’s look at the figures. The company, which is controlled by Chinese conglomerate Sanpower Group, said pre-tax profits rose to £3.4 million from £1.3 million a year ago. But EBITDA fell by £2.7m to £63.6m due to lower financial services income in H1.
Sales were £1.3 billion, the same as the previous year, but online sales surged 16.1% and now account for 21.8% of the company’s total revenues, a relatively high amount compared to some chains.
Brand sales rose 3.6% but its house brands fell 2.1% and womenswear dipped 0.6%, although beauty was strong, rising 4.1%.
And that volatility? The company said it saw patchy conditions last fiscal year and that has continued in the current period. The last two months were a good example of this with February trading “subdued” but March seeing “significant improvement”.
Finance head Colin Elliot said the market remains “challenging” but highlighted the profits surge as well as the “resilience of our business model” and the new senior management team.
This is a crucial period for House of Fraser with the company facing up to the new retail world via a major revamp plan. That will see it dropping some brands, focusing on core best-seller labels both from external suppliers and its own house labels, and targeting its core shopper rather than chasing the youth pound.
It’s also expanding abroad with its first Chinese store opened last year and more planned.
Based on the sales figure for its house labels last year, its revamp plan would appear to make sense as the company has clearly identified where its strongest sales are coming from and is working to cut out the dead wood from its portfolio.
Whether this will be enough to significantly enhance profits remains to be seen. It plan to reshape itself comes just as major rival Debenhams, which reports its latest results Wednesday, is doing exactly the same thing.
The two retailers, whose London flagships are located side by side on Oxford Street, are both working hard to reach the omnichannel shopper, to offer new services to lure their core customers into physical stores, and to maximise profit margins by selling more fast-growing categories rather than focusing mainly on fashion.
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