House of Fraser, the department store part-owned by Scottish entrepreneur Sir Tom Hunter, has claimed a rise in Christmas profits and says its debt is under control.
House of Fraser, the department store part-owned by Scottish entrepreneur Sir Tom Hunter, has claimed a rise in Christmas profits and says its debt is under control.
The future of the company has been uncertain since the credit crunch forced the nationalisation in October of Icelandic lenders Kaupthing, Landsbanki and Glitnir, the major backers of the chain's main shareholder Baugur.
Yesterday House of Fraser reported a rise in gross profit over the five weeks to January 3 as more efficient stock management and store growth helped to offset like-for-like sales that were 1.5% down on a year ago.
The performance is slightly ahead of rival Debenhams. It saw like-for-like sales fall 3.3%, albeit over a far longer period of the 12 weeks since October 21, which encompassed particularly weak November trading days. Both Debenhams and House of Fraser launched heavy pre-Christmas promotional sales.
Clothing retailers continued to show varying fortunes, with upmarket clothes store Ted Baker making a profits warning yesterday, while at the other end of the spectrum discount retailer Peacocks revealed a 22% rise in Christmas sales and unveiled an expansion plan.
Don McCarthy, chairman of House of Fraser, which owns Edinburgh department store Jenners, said: "There is no doubt that the retail sector has experienced one of its toughest years to date. However, our performance over the Christmas period was positive and we are satisfied with the robustness of our business."
House of Fraser announced that it had made another scheduled debt payment of £34.5m on January 2. It was unable to provide up-to-date figures yesterday but when it updated investors in October the company had debt of around £250m. It said it has repaid and/or cancelled more than £140m of its facilities arranged at the time of the acquisition. Most of its debt is with HBOS, which is also a 5.6% shareholder, although a small part of it is understood to be held with an unnamed Icelandic institution.
House of Fraser added that it "remains fully compliant with all of the conditions contained within its banking agreements, and its working capital facility remains available for use".
The company added that with no new major projects planned the pressure for working capital, which last year totalled £20m, is "greatly reduced".
House of Fraser, which was founded in Glasgow 160 years ago, has 62 stores across the UK and Ireland.
The company was acquired by the Highland consortium for £351m in November 2006, with Hunter taking an 11.1% stake and Baugur 35%.
Baugur's £1bn debt with the troubled Icelandic institutions has prompted speculation that it would be forced to offload its stake. Entrepreneur Sir Philip Green is among those interested, although industry sources suggest that Hunter would also consider upping his holding if shares become available.
Baugur owns Mosaic Fashions, the company behind high street fashion names Principles, Oasis, Karen Millen and Warehouse, whose lenders have sent in an emergency restructuring team. It also owned tea and coffee retailer Whittards, which went into administration just before Christmas, and was a large shareholder in now-defunct Woolworths.
But the retail and property slump has also affected Hunter. His fashion chain USC entered administration at the end of December, although he bought back some of its stores. He also owns fashion footwear chain Office and has a stake in BhS. He has had to write off £35m from his exposure to housebuilder Crest Nicholson, and about £30m in property developer McCarthy and Stone.
Meanwhile upmarket clothes chain Ted Baker yesterday issued a profit warning as sales growth slowed dramatically. It warned that profit for its full year would be at the lower end of market expectations, which currently stand at £19m to £23m.
It posted sales growth of 7.2% between November 1 and December 24 over the year before. Previously sales had been rising at 13.3%. But investors kept faith, and its shares rose 4p to 328p.
In contrast, sales at value clothes retailer Peacocks' 526 stores are booming. The privately-owned company said like-for-like sales for the two weeks to January 3 increased 22% year-on-year with gross margin "strongly positive". In its third quarter to January 3 like-for-like sales were up 1%, while gross profit was up 5%.
It said it planned to capitalise on the demand by opening 50 stores over the next two years.
