House of Fraser to shut half its stores, costing up to 6,000 jobs - as it happened

Graeme Wearden

from on 2018-06-07 15:39 (#3RT65)

All the day's economic and financial news, as House of Fraser announces plans to shut 31 department stores and lay off thousands of staff

Shoppers give their views
Full report: House of Fraser to shut 31 stores
List: These stores will close in early 2019
Creditors will vote on plan later this month
Oxford Street, Edinburgh, Birmingham and Cardiff all hit
Chairman: We need to do this to survive

4.39pm BST

I think that's all for today.

Here's our news stories on the House of Fraser store closure plan:

4.39pm BST

After suffering technical problems that delayed that start of trading by an hour, Britain's stock exchange has ended the day calmly.

The FTSE 100 just closed eight points lower at 7,704 points.

Oil rallied hard across the session, jumping 1.5% and recouping losses from the previous session. Buyers came flooding back into the oil market as concerns over supply issues in Venezuela overshadow fears that OPEC could be on the verge of easing oil production cuts.

With 2 weeks remaining until the OPEC meeting in Vienna, we are expecting an increase in volatility as investors weigh up the probability of an increase in production against the increasing supply problems in Venezuela and Iran. Oil stocks such as BP and Shell traced the price of oil higher.

4.08pm BST

Here's some instant reaction to Dave Ramsden's views on the UK economy:

BoE's Ramsden states that the MPC's view is that the economic slowdown in Q1 was temporary and appears to have been borne out of recent data $GBP

Relatively hawkish from Ramsden.

4.05pm BST

Newsflash: A senior Bank of England policymaker has declared that the UK economy is emerging from its recent soft patch.

Deputy governor Dave Ramsden is telling an audience in London that recent data supports the bank's view that the slowdown earlier this year was temporary.

"It is still early days. We are still only two thirds of the way through the second quarter, less far through the second quarter data cycle, and only a month has passed since our last MPC meeting.

"Even so, the data we have had so far suggests our interpretation of the slowdown in the first quarter as temporary looks to be being borne out. Consumer confidence and consumer credit both picked up in the latest data, as did retail sales and several business surveys. That included the latest services PMI (purchasing managers' index) output balance, representing 80% of the economy. So far at least our May judgement looks on track.

3.47pm BST

Another reason why landlords are unhappy about House of Fraser's move:

Years ago, House of Fraser did a sale and leaseback on a great chunk of its estate.
Now it wants a CVA to cut its rent bill to the people who bought its shops.
Cue plenty of anger in the property business...

3.27pm BST

House of Fraser's attempt to use a Company Voluntary Arrangement (CVA) to close 31 stores and cut the rent on some others will annoy some landlords.

Matthew Weaver, partner at Radcliffe Chambers, explains why property owners are losing patience with this legal manoeuvre:

Landlords are becoming restless in the face of numerous CVAs proposed and entered into by retailers in which they are faced with significant decreases in the rent being charged and, in some instances, closure of stores which still have significant lease periods left on them - thereby reducing or removing income for the landlords. Typically, landlords of profitable stores are treated reasonably well in CVA proposals but those of loss-making stores are offered very little. This flexibility to treat different landlords differently (i.e. repaying the majority of some landlord debts under a CVA but very little of other landlord debts) has angered landlords generally as has the fact that CVA proposals often treat other creditors (suppliers for example) much better and do not impact on the rights of secured creditors (such as banks or other funders).

In addition, other businesses (most notably Next) have indicated that they are now sick and tired of competitor businesses using CVAs to reduce overheads, giving them an obvious competitive advantage. Next has stated that it will begin to negotiate a "CVA clause" into its new leases whereby its rent will be reduced in keeping with any reduction under a CVA of a business trading nearby to their stores. This will only increase the anger of landlords.

3.25pm BST

Plymouth City Council are disappointed that their local store faces the axe:

#Plymouth's Council leader Tudor Evans speaks out about House of Fraser announcement: "Clearly a blow for #Plymouth to have this store on the list...but we need to find out more about the proposal." https://t.co/yYXAoMvy7A pic.twitter.com/QkJ7kEMZTD

2.51pm BST

One male shopper on Oxford Street tells us:

"It's a bit of a shock."

"I don't really do online shopping. I like the personal touch."

"I got a winter coat from House of Fraser [in the past]. It's quite good."

2.24pm BST

Shoppers at House of Fraser's Oxford Street branch say they were shocked and saddened to hear of the flagship store's closure.

"I'm shocked that they are closing this one because it is Oxford Street. There are still so many people that don't do online shopping. I like to come and try things on."

"It's sad people are going to lose their jobs. It's something like BHS - it's another shop that has been here for a long time."

"I'm a big high street shopper. I'm very sad to see so many big high street names closing down. I feel sorry for us the shopper, and very sorry for the people who work here."

1.54pm BST

Shoppers in Birkenhead, Merseyside, are unhappy that their local House of Fraser is earmarked for closure.

Doreen Gibson, 81, from Greasby, Wirral, told the Press Association that she and her friends would miss the department store badly - and blamed young shoppers for buying on the Internet...

"We've been coming here every two weeks for 25 years. We meet our friends and have a coffee in the restaurant and a bit of shopping.

"It is devastating. They are all shopping online now, all the younger ones, that's what's ruining it all. Some people still like to go and see what they are going to buy.

1.45pm BST

After crunching the numbers, we can report that at least 35,00 jobs are at risk - or already cut - across Britain's retailers and restaurant chains since the start of this year:

1.22pm BST

Despite the Father's Day offers that are heavily advertised in the street-level window displays, the Frasers store in Edinburgh was quiet on Thursday morning, as the unexpectedly warm weather encouraged shoppers outdoors, my colleague Libby Brooks reports.

"The high streets are suffering everywhere, even Kirkcaldy where we're from has so many closures. In a place like Frasers they are charging 50% more than you'd pay online and they still can't make a profit. Shopping online is not just convenient, it's so much cheaper."

"What will they do with the building now? It's been here forever but I can't think who would want to take it over."

"People don't come to this end of the street. It's really the wrong location. They go further up Princes Street, where the Scott Monument is. Jenners is in a really good spot."

1.08pm BST

Here are a few of the House of Fraser stores facing the axe, if the company's creditors approve its restructuring plan.

12.38pm BST

Another UK company, the AA, is facing its shareholders at its annual general meeting.

At the AA annual meeting, chairman John Leach has said the company will not be answering any questions about former chairman Bob Mackenzie, who is suing the company for 225m after he was sacked over an assault on a colleague at a country hotel.

Despite finance chief Martin Clarke having voluntarily given up a bonus earlier this year, 24% of voting shareholders have rejected the company's pay policy, although not all votes are in yet.

12.27pm BST

One of House of Fraser's (many) problems is a failure to engage with millennials.

Amelia Brophy, head of data products at YouGov, explains how the chain has lagged behind nimbler retail rivals, and failed to impress younger shoppers:

"YouGov BrandIndex data underlines how House of Fraser's brand perception has declined over the past year. Its Impression score (whether someone has a favourable impression of the brand) among the general public has declined from +23 last May to +19 now. Its score among younger consumers, those in the 18-34 age bracket, is even lower, at +17.

This is been mirrored by shifts in the brand's Quality score, which, among the general public has fallen from +32 to +29.

12.01pm BST

Patrick O'Brien, UK research director at GlobalData Retail, reckons Marks & Spencer could benefit from House of Fraser's retrenchment:

M&S stands to gain most, in terms of clothing sales, from House of Fraser closures, followed by Debenhams pic.twitter.com/xgkDzRRp4T

11.56am BST

Typo alert: That last headline should have said 'Poundworld', of course, not 'Poundland'. Now fixed, sorry for any confusion....

11.49am BST

It's turning into another black day for UK retail, with reports that budget chain Poundworld is on the brink of administration.

Poundworld could file for administration today, putting more than 5,000 jobs at risk across the UK.

Sources told PA that the notice will give Poundworld time to structure a deal, which could be undertaken through a pre-pack administration, with private equity firm R Capital, former owner of Little Chef.

The administration will be handled by Poundworld's advisers Deloitte.

Revealed: Prospect of rescue deal for Poundworld receding, with former Little Chef-owner Rcapital in last-ditch talks that have no better than a 50-50 chance of success, I'm told. Notice of intention to appoint administrator likely to be filed today. https://t.co/bwDJ3YXIud

11.17am BST

The Labour Party have accused the government of neglecting Britain's struggling retail sector, while it struggled to get to grips with Brexit.

Rebecca Long Bailey MP, Shadow Business Secretary, points out that more than tens of thousands jobs are being lost this year:

"In the first three months of this year 21,000 jobs were lost in the retail sector. Today another 6000 jobs are at risk as House of Fraser confirms store closures across the UK.

"While the Cabinet is in chaos over Brexit their lack of focus on our high streets is leading to mass job losses, failing one of the biggest employers and industrial sectors in the UK, which is why Labour has called on the Business Secretary to publish a retail sector strategy to safeguard jobs.

This is #HouseOfFraser in Worcester this morning. The store is one of 31 out of 59 across the country which are to close pic.twitter.com/oOWPsgFhNI

10.56am BST

The rising use of CVAs by cash-strapped retailers is hurting Britain's landlords, warns Daniel Stern, commercial property litigator at Manchester-based law firm Slater Heelis.

Stern says there is a 'rescue culture' at the heart of insolvency regimes, allowing retailers to go into administration, shed unprofitable operations, and then emerge stronger.

"Only 75 per cent of a company's creditors need to approve a CVA which is then legally binding on all unsecured creditors, including landlords, regardless of whether the landlord agreed the proposal.

"This effectively means property owners must accept lower rents to help a tenant avoid financial collapse. As landlords are often pension and investment funds this is having a knock-on effect on the ordinary man in the street.

10.54am BST

The Huffington Post have helpfully listed the 28 House of Fraser stores that are staying open if the CVA is agreed.

They are: Gateshead Metro Centre, Huddersfield, Leeds, Manchester, Nottingham, Sheffield Meadowhall, Sutton Coldfield, Bluewater, Croydon, London City, London Victoria, London Westfield, Richmond, West Thurrock Lakeside, Bath, Bristol, Cheltenham, Cirencester, Exeter, Guildford, Maidstone, Norwich, Reading The Oracle, Rushden Lakes, Edinburgh (Jenners), Glasgow, Loch Lomond Shores (Jenners), and Belfast.

10.23am BST

Victor Garcia Capdevila of credit rating agency Moody's believes the store closure plan should give House of Fraser some breathing room to tackle its problems.

Capdevila says:

"Store closures will allow House of Fraser to reduce its rent bill and exit long-dated lease agreements in unprofitable locations.

This should facilitate and accelerate the transformation of the company into a more effective multi-channel retailer while alleviating liquidity challenges that have necessitated cash injections from its owner over the past few months."

10.03am BST

House of Fraser says it has put another 1m into its pension fund to secure the backing of its pension trustees for its CVA restructuring plan.

10.01am BST

In other news, Britain's housing market is still in sluggish mode, according to the latest survey.

"Both of these measures have fallen since reaching a recent peak, in the final months of last year. These latest price changes reflect a relatively subdued UK housing market. After a sharp rise in January, mortgage approvals have softened in the past three months.

Whilst both newly agreed sales and new buyer enquiries are showing signs of stabilisation having fallen in recent months."

9.49am BST

The Cardiff branch of House of Fraser, which is earmarked for closure in today's plan, is opening late today (presumably because staff are being briefed about the situation?).

House of Fraser in Cardiff delays opening today ... pic.twitter.com/Pl4VTjQNCT

9.42am BST

The store closures announcement is awful news for thousands of House of Fraser staff.

Some will have discovered their job is being eliminated as they headed to work this morning.

It will mean more than 1,100 people losing their jobs across the West Midlands. The Beatties store in Wolverhampton employs 279, 150 work at Telford, 83 at Shrewsbury and 688 at the House of Fraser store in Birmingham.

Some staff learned of the news through Twitter before they even got to work today.

9.25am BST

Here's our retail correspondent Sarah Butler on today's news:

House of Fraser is to close 31 stores, more than half of its UK chain, putting a further 6,000 retail jobs at risk and dealing another hammer blow to British high streets.

The struggling department store group's Oxford Street flagship in London and outlets in cities including Birmingham, Cardiff and Edinburgh are among those facing closure. The drastic cuts form part of a rescue plan that will also lead to the company moving out of its head offices in London and Glasgow.

9.16am BST

House of Fraser's creditors will vote on today's proposal on 22 June.

As well as shutting 31 department stores, the company also wants to shave 25% off the rent of another 16 stores.

9.05am BST

Back to House of Fraser.... and ITV News' Joel Hills reports that some landlords will oppose the plan to shut 31 stores.

Not so long ago House of Fraser was busy flogging its department stores on "sale and leaseback" deals to the same landlords it now wants to accept heavy losses. There's anger out there. One landlord has told me they'll vote against CVA and "take my chances in administration".

9.02am BST

Back in the City, London's stock market failed to open at 8am.

The London Stock Exchange are blaming 'technical' issues, and have just managed to get trading running.

8.57am BST

Alex Williamson, chief executive of House of Fraser, has promised to support the 6,000 staff who could lose their jobs:

"Today's announcement is one of the most important in this company's 169-year history.

"We, as a management team, have a responsibility to take necessary steps to ensure House of Fraser's survival, which is why we are making these proposals.

8.53am BST

Assuming today's plan is approved, the 31 stores earmarked for closure up and down the country will shut in early 2019.

8.48am BST

John Pal, retail expert at Alliance Manchester Business School, says retailers such as House of Fraser are facing a 'perfect storm'.

Rising business rates, competition from internet rivals, and over-capacity on the high street are making some stores unviable.

"News that House of Fraser is to close stores comes as no surprise as many retailers grapple with stagnating sales and increasing running costs.

Once the training budget has been cut, over-time slashed and overall headcount reduced, in both head offices and in stores, it's time to focus on the big costs of which stores are a main one.

8.41am BST

Richard Lim, chief executive, Retail Economics says today's store closures reflect the move away from high street stores and onto internet shopping:

"News that House of Fraser is to shut its Oxford Street store and 30 others is a huge statement of intent. The closure of such an iconic flagship store signals the massive restructuring task at hand.

"Department stores are incredibly expensive to operate and the last few years have seen costs spiraling upwards from business rates, rents and National Living Wage. These traditional retail business models that hold huge fixed costs are simply becoming unsustainable for some retailers.

House of Fraser restructuring plans = shutting half stores inc Oxford Store flagship, marking relegation from retail premier league, & interesting move given Chinese owners wish to woo international market. Sign of desperate times

8.38am BST

Today's grim announcement follows weeks of talks between House of Fraser's owners - China's C. Banner - and its lenders and landlords.

House of Fraser needs 70 per cent of its creditors - including landlords - to back the plan filed this morning. If they don't, then the entire company would probably collapse into administration.

8.27am BST

Frank Slevin, chairman of House of Fraser, say the company needs to shut more than half its stores, or face collapsing altogether.

"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.

"Our legacy store estate has created an unsustainable cost base, which without restructuring, presents an existential threat to the business.

8.25am BST

House of Fraser is shutting these 31 stores under a company voluntary arrangement.

It's effectively a deal between a struggling firm and its creditors under which underperforming stores are shed.

"The CVAs proposed by House of Fraser give the business a vital lifeline to avoid administration by renegotiating the lease terms of its UK-wide property portfolio, as part of a wider restructuring.

The business has been impacted by the mounting pressures facing the UK high street, with the declining profitability of certain stores exacerbated by costly legacy leases which were originally negotiated many years ago. With trading conditions unlikely to materially improve in the short term, the future of House of Fraser is at significant risk unless steps to restructure the business both financially and operationally are taken."

8.17am BST

NEWSFLASH: Retail chain House of Fraser has announced plans to shut more than half of its UK and Ireland stores, in a move that will cost up to 6,000 jobs.

House of Fraser is planning to close 31 of its 59 stores across the UK and Ireland, under a restructuring plan filed at the Court of Session in Edinburgh this morning.

Altrincham, Aylesbury, Birkenhead, Birmingham, Bournemouth, Camberley, Cardiff, Carlisle, Chichester, Cirencester, Cwmbran, Darlington, Doncaster, Edinburgh Frasers, Epsom, Grimsby, High Wycombe, Hull, Leamington Spa, Lincoln, London Oxford Street, London King William Street, Middlesbrough, Milton Keynes, Plymouth, Shrewsbury, Skipton, Swindon, Telford, Wolverhampton, Worcester.

8.10am BST

Back in the UK, Thames Water is handing 65m to customers as part of a 120m package of penalties for failing to tackle leaks:

8.09am BST

Germany's economy ministry is trying to sound upbeat - pointing out that the country's factories still have a decent backlog of orders to plough through:

"To what extent uncertainties play a role, especially from the external environment, is difficult to assess.

However, the order backlog in the manufacturing sector is still very high."

8.08am BST

Carsten Brzeski, ING's chief economist for Germany, is disappointed by the 2.5% decline in German factory orders last month.

He agrees that it suggests Germany's economy has weakened this year.

Normally, an increase in new orders after three consecutive drops looks as safe a bet as predicting tomorrow's sunrise. However, it seems that today the sun did not rise for German industry. It will get harder and harder to explain these monthly drops with one-offs like the weather or the timing of holidays. In fact, evidence is piling up that the soft patch at the start of the year has been more serious than previously thought.

For the time being, we remain cautiously positive. In absolute terms, order books are still richly filled, assured production is high and inventories have been reduced recently. All boding well for industrial activity in the coming months. However, today's disappointing new orders reading sends a clear warning that nothing should be taken for granted.

7.57am BST

Good morning , and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Ouch! German factory orders just turned negative YoY. pic.twitter.com/m3vwlmofjY

German factory orders tumbling by -2.5% m/m in April makes for a horrible start to Q2. Core orders at -1.7% were equally downbeat continuing the string of weak hard data. A material bounce-back from the 0.3% q/q GDP growth in Q1 is becoming ever more questionable.

Order intake to the German manufacturing industry down four consecutive months. Hmm... pic.twitter.com/rNWQTAaQbs

Risk on in Wall Street, transferred to a solid session in Asia and is seen lifting European markets into the opening bell.

Despite talks of retaliation measures from US allies on trade tariffs, which in the words of the World Bank, risks sending the global economy back to a state similar to that 10 years ago, global equity markets continue bounding higher.

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