In a recent announcement, Frasers Group, the owner of House of Fraser, revealed its intention to potentially close additional stores due to the perceived failure of the traditional department store model.
The company has already closed eight stores in the past year and has expressed concerns about the global viability of the department store concept.
Frasers Group CEO Michael Murray, overseeing the retail empire led by Mike Ashley, stated that their department store portfolio is constantly under evaluation and some of the outlets are considered too large.
The company aims to find solutions for the surplus space in its stores.
Notably, House of Fraser has already reduced its store count from 59 to 31 since its acquisition by Frasers Group in August 2018.
Murray highlighted that historical stores, with footprints of 150,000ft² or larger, are now deemed too big and have been underinvested in. The company is now seeking stores of approximately 50,000ft² or smaller.
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Decline of traditional department stores
Frasers Group’s announcement is consistent with the overall trend of decline observed among traditional department stores.
Other major UK chains like Debenhams, Beales, John Lewis and Fenwick have faced difficulties, with some going out of business and others shutting down several stores.
Despite the challenges in the department store sector, Frasers Group reported significant financial gains.
Pre-tax profits for the group nearly doubled to £660m ($848.2m), driven by a 16% rise in sales to £5.6bn in the fiscal year ending on 30 April.
However, the premium division, which includes Flannels and House of Fraser, faced a loss of £100,000 due to factors such as the removal of business rates relief and costs associated with store closures.
Expansion and strategic investments
Frasers Group has pursued growth opportunities through strategic acquisitions, including online specialist Studio Retail and several brands from JD Sports.
Murray revealed the company’s intentions to continue building stakes in listed companies, considering it essential for strengthening relationships and fostering beneficial partnerships.
Looking ahead, Frasers Group remains optimistic about the future, projecting up to £550m in underlying profit for the upcoming year.
This positive outlook comes despite the challenges posed by the tough consumer environment, with the company maintaining a strong focus on cost management.