Jenners faces unknown as Mike Ashley bails out House of Fraser
Mike Ashley, who also has a large stake in luxury fashion business Flannels, swooped in to secure the buyout just hours after the company, which owns the prestigious Jenners store on Princes Street, announced it was going into administration yesterday morning.
The deal could save the 17,000 jobs under threat across the UK, including those across four Scottish outlets.
In a stock market announcement, Sports Direct said it had acquired all of the House of Fraser UK stores, the brand and all of the stock in the business.
The deal was struck through a pre-pack administration process, where a company is put into administration before a new buyer cherry picks the best assets. Mr Ashley said: “This is a massive step forward and further enhances our strategy of elevation across the group. This will benefit both House of Fraser and Flannels in the luxury sector.
“We will do our best to keep as many stores open as possible. It is vital that we restore the right level of ongoing relationships with the luxury brands.
“Our deal was conservative, consistent and simple. My ambition is to transform House of Fraser into Harrods of the High Street.”
The tycoon beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill who was understood to have offered in excess of £100m, which would have avoided administration and included House of Fraser’s pension scheme.
However, accountancy giant Ernst and Young (EY), which was overseeing the process, opted for Mr Ashley’s offer.
Experts are asking what the deal means for the city’s retail landscape and how it might impact the 180-year-old Jenners store, already known as the Harrods of the North.
Liz McAreavey, chief executive of the Edinburgh Chamber of Commerce, said: “Hopefully this sale will not only protect this iconic high street brand, but will also safeguard thousands of jobs.
“It is a reminder of the rapidly changing face of high street retail as online shopping soars.
“Customers expect so much more now and retailers are realising they need to be more innovative in creating the shopping experience that will bring customers through the door.”
Conservative city centre councillor Joanna Mowat said: “Jenners is an iconic Edinburgh institution.
“The future of the city’s retail market and of Princes Street is a big concern with big names under threat.
“As a city we really need to buck up our ideas in the industry. How can we support the retail sector and enjoy success in the city centre?
“If people lose the habit of going to Princes Street, it’s not a good thing.
“We need to be working with businesses to see what we can do to keep shops open.
“I’m hopeful that both House of Fraser and Jenners will stay open, but we need to be looking at all of the shops too.”
Sources said Mr Ashley would now start the process of turning some House of Fraser stores into Sports Direct outlets and rebrand others under the Flannels fascia.
Prior to its collapse, Mr Ashley had held an 11 per cent stake in the department store chain.
Previously EY had drawn up back-up plans as a part of the company voluntary arrangement (CVA) to shut 31 of 59 House of Fraser stores – a deal approved by creditors in June.
But after a cash injection of £70m, seen as the high street retailer’s last chance of survival, failed to materialise after a deal with Hamley’s Chinese owners C.banner fell through pushing the company towards administration.
Edinburgh’s House of Fraser store in the West End was earmarked for closure on September 15 after the landlord served notice to quit. A statement from the retailer said remaining staff would be accommodated at Jenners, but there has been no confirmation of further plans.
Paul Souber, co-head of Colliers International’s retail division, said: “This could be viewed as positive news for high streets nationwide as despite the doom and gloom sentiment surrounding the sector at present, this is really a boost in confidence for both landlords and retailers as well as employees in the trade, who were due to potentially lose their jobs. In addition, it will be interesting to see how Sport’s Direct’s multi-channel experience could help to turn around House of Fraser’s department stores’ ill-fate.
“As we are all well aware, retailers and landlords are facing the most challenging environment since the post global financial crisis of 2008, driven by changing consumer trends, higher inflation, lower consumer spend and changing shopping habits.”
Adam French, consumer Rights expert at agency Which?, said: “This sale should not have any negative impact on House of Fraser customers, so we want to see the company honouring its existing obligations to them.
“That means accepting gift vouchers, fulfilling online shopping orders and processing returns and refunds as if nothing has changed.”