House of Fraser’s flagship London store saved after new deal with landlord

House of Fraser

House of Fraser’s flagship Oxford Street store will now stay open after the chain’s new owner agreed revised terms with its landlord.

The store had been due to close under a restructuring plan that House of Fraser announced in June.

However, the department store group fell into administration earlier this month, and was bought by Mike Ashley’s Sports Direct.

The deal is the first covering a House of Fraser store since the takeover.

The store was one of the 31 earmarked for closure under the CVA restructuring deal that was first struck before Mr Ashley stepped in with his £90m rescue bid.

His plan is to keep 80 per cent of House of Fraser’s 59 stores across the UK open. A spokesperson said they were working through the list on “a store-by-store basis”.

Property giant CBRE, which is advising Sports Direct, said negotiations over the Oxford Street outlet had been conducted at “great speed”.

James Keany from CBRE said: “This deal only happened because all parties realised it was better to keep the store open and fully operational.

“It was a real case of landlord and tenant genuinely working together and at great speed. Everyone was sensible about the terms of the transaction.”

Jobs threat

As Sports Direct bought the chain just hours after it went into administration earlier this month it is not legally obliged to pay suppliers money owed before its £90m buyout, as their debts were part of the administration.

Mr Ashley has said he intends to turn the chain into the “Harrods of the High Street”.

On Monday, it was revealed more than 600 jobs were under threat at two House of Fraser warehouses which supply deliveries to stores and customers.

The GMB union said 627 staff at the two warehouses were told on Friday that they were at risk of redundancy.

XPO Logistics operates the sites, in Northamptonshire and Buckinghamshire. Last week, it stopped processing orders due to a payment dispute, forcing the retailer to cancel and refund all online orders.

The company was thought to be owed £30.4m by House of Fraser when it fell into administration, according to administrator EY, but sources close to the the warehouse operator say it is owed around £12m.

XPO Logistics is one of a number of suppliers that have been left out of pocket. In total, EY has estimated suppliers are owed £484m.

Dr Gordon Fletcher, from the University of Salford, commented on what this means for the brand’s future.

He said: “The first major announcement since the Sports Direct rescue of House of Fraser stamps Mike Ashley’s style of business and his authority all over the upmarket chain.

“By retaining London’s iconic outlet on Oxford Street, the desire to be the ‘Harrods of the high street’ is reinforced. Any other course of action would have made the rescue of House of Fraser look like an opportunistic property gamble. 

“Keeping the doors open on Oxford Street is only one part of the story – it was by no means a done deal as a range of involved parties had to come to an agreement.

“Ashley must now come good with a business model that is sustainable and profitable for everyone concerned. With concession holders such as Mulberry already flagging up reduced profits in the wake of the recent uncertainty House of Fraser must still innovate in order to survive.”