House of Fraser reports flat sales, outlook cautious

House of Fraser in its update for the 26 weeks to July 30, 2016 reported total sales in line with prior year, as well as gross profit and gross margin improvement. The company said total GTV stood at 573.5 million pounds (745 million dollars) and excluding Virgin Travel, like-for-like sales grew by 0.9 percent.

Commenting on the first half trading, Nigel Oddy, CEO of House of Fraser said, “We have, like many of our peers, experienced an extremely volatile trading environment since the final quarter of fiscal year 2016, and we expect this uncertain economic situation to remain for some time. Despite these challenging market conditions, we are pleased to have delivered like-for-like sales growth, improved cash and gross margin and increased gross profit in the first half.”

Operational highlights of the first half

Like-for-like branded and concession excluding Virgin Travel sales increased by 2.1 percent and 1.3 percent respectively, while house brand sales declined by 3.7 percent. The company said, home was the strongest-performing category with sales growth of 4.5 percent and menswear and beauty sales grew by 1.8 percent and 1.9 percent respectively.

The company launched new premium brands including Charlotte Tilbury, All Saints, Monsoon, and Mulberry in its stores as well as online during the period. 153 shop-fits were also launched across the store portfolio in H1, with a significant number of additional shop-fits planned for H2. The company aims to open six Hamleys concessions during the second half, as House of Fraser looks to further improve its space utilisation and enhance its retail offer.

The Group continued to invest in enhancing its store portfolio, including five additional store refurbishments with target completion by end of October/early November, making a total of 12 refurbishments over the course of two years and a new shopping centre development in Rushden Lakes in Northamptonshire, which is due to open in summer 2017.

The company will also open its first store in China in late 2016. Inspired by Frasers store in Glasgow, the new store in Nanjing will provide a unique retail experience for the Chinese market, offering a broad range of international and local brands.

Current trading and outlook

The company said, opening weeks of Q3 fiscal year 2017 have witnessed further challenging trading conditions and low consumer confidence, as seen across the retail sector. As a result, trading continues to be volatile, and has been further impacted by disruption to trade as a result of the extensive works currently being carried out in the five refurbishment stores. Accordingly, sales for the first eight weeks to September 24, 2016 declined by 2 percent on the same period last year. It expects to see subdued trading reported for Q3. The company remains cautiously optimistic of delivering further growth in this fiscal year.

House of Fraser also strengthened its team by recently appointing David Walmsley as Chief Customer Officer and Maria Hollins as Executive Director, Product & Trading.

“The UK retail sector is facing significant change in structural dynamics as consumers shopping habits and delivery expectations continue to evolve. Under the leadership of our strengthened management team we are, however, highly confident in our ability to navigate these changes and position House of Fraser to deliver on our customers’ demands,” added Frank Slevin, Executive Chairman of House of Fraser.

Picture:House of Fraser