Department store model is ‘broken’ according to Frasers Group
Frasers Group has announced the possibility of closing additional stores, after closing eight stores over the past year and claiming “the department store globally is broken”.
Since its acquisition by Mike Ashley’s retail empire in August 2018, House of Fraser has undergone significant downsizing, reducing from 59 stores to 31. Michael Murray, the chief executive of Frasers, explained that the historical store sizes of 150,000 sq ft or larger are now considered too big, leading to insufficient investment in the past. The company now aims for stores of around 50,000 sq ft or smaller.
Despite the closure of some stores, Frasers reported a substantial increase in pretax profits for the group, reaching £660m, with sales rising 16% to £5.6bn in the year ending on April 30.
The group attributed the improved profit margins to a stronger relationship with key brands like Nike and additional profits from property disposals.
Frasers’ financial performance was also boosted by various acquisitions, including the online specialist Studio Retail and several brands from JD Sports. Michael Murray hinted at the possibility of further acquisitions, emphasizing the group’s focus on building stakes in listed companies to foster strategic relationships.
Looking ahead, the company expects to achieve up to £550m in underlying profit for the upcoming year, despite challenges in the consumer environment. Frasers intends to remain focused on cost inflation to achieve this goal.