LONDON — Beleaguered UK department store House of Fraser on Friday called in administrators after failing in its attempts to negotiate a rescue package or sale of the business.
House of Fraser said in a statement on Friday that talks with investors and creditors had “not concluded in a solvent solution.”
EY, one of the “Big Four” accountants, have been appointed as administrators. House of Fraser, which employs 17,500 people across nationwide, will continue to trade while EY tries to find a buyer for part or all of the business.
Companies fall into administration in the UK when they become insolvent, with debts larger its assets. Administrators are appointed to take control of the business and act in the best interest of creditors, realizing value by selling the business part or whole. Sky News reports that Sports Direct billionaire Mike Ashley is an early front-runner to buy the business.
House of Fraser said in its statement: “Significant progress has been made towards completing a sale of the Group’s business and assets. The proposed administrators are expected to continue to progress those discussions with a view to concluding a transaction shortly after their appointment.”
If a buyer cannot be found, EY will likely shutter the company and liquidate its assets. Even if a buyer can be found, jobs may be lost in the process.
Richard Hyman, an independent retail analyst, told Business Insider: “Whatever happens, you can see that House of Fraser’s staff are the last to be informed and this morning, don’t really know what their future is. It’s a very shabby way to treat people and bad news for the wider economy.”
House of Fraser, which was founded in 1849 in Glasgow, has been at risk of toppling for several months. The department store’s Chinese owners tried to seal a rescue deal earlier this month that collapsed, leaving House of Fraser in a precarious position. The company also faced an extended battle with landlords to try and reduce its rents and buy more time.
House of Fraser was acquired by Chinese group Sanpower for £450 million in 2014, but the chain has struggled since then. House of Fraser lost £9 million last year and sales over the crucial Christmas period fell by 2.9%. The company has a £400 million debt pile.
Mark Williams, the president of retail property organisation Revo, said in a statement earlier this week: “House of Fraser is a business that has been under-invested in for many years and that’s the ultimate reason for its failure.”
The collapse of House of Fraser follows the demise of fellow department store BHS in 2016. The UK is facing an extended slump in retail sales this year and department stores have been particularly badly hit. Debenhams, another UK department store, announced an 85% collapse in profits in April.
Frank Slevin, chairman of House of Fraser, said in a statement: “This has been an extraordinarily challenging six months in which the business has delivered so many critical elements of the turnaround plan. Despite the very recent termination of the transaction between Cenbest and C.Banner [the collapsed rescue plan], I am confident House of Fraser is close to securing its future.”
Hyman said: “There will be more retail casualties — we are only really in the early stages of a huge shake out.”