House of Fraser slumped to a near £44mln loss in 2017 as sales fell amid a tough UK retail market.
Chinese firm C.Banner, which has agreed to buy a 51% stake in the department store for £140mln, said House of Fraser swung to a £43.9mln loss in the year to December 31, 2017, from a £1.5mln pre-tax profit in 2016.
The loss reflects sluggish sales and start-up costs for the launch of stores in the Chinese cities of Nanjing and Xuzhou, and fees paid to the UK business for the use of the House of Fraser name overseas.
Sales dropped 6.3% to £787.8mln, underlining the struggles facing brick and mortar retailers from weaker consumer confidence and online competition.
A number of retailers have been closing stores or filing for administration in recent months, including Carpetright, Toys R Us and Jacques Vert.
“The Brexit referendum and the UK’s resultant decision to leave the European Union and the terrorist attacks in London, combined with a rapidly evolving retail market, produced a period of uncertainty and volatility that resulted in a difficult trading environment for the whole retail industry in the UK,” C.Banner said.
C.Banner says deal to buy House of Fraser will deliver cost savings
C.Banner, which also owns Hamleys in the UK and Sundance and MIO footwear brands in China, told investors it was buying a controlling stake in House of Fraser to boost its presence in the Chinese and overseas retail markets.
READ: Control of House of Fraser changes hands
The group said the deal would deliver cost savings and by bringing together all the retail brands it owns.
C.Banner will buy a 34% stake from current owner, Nanjing Cenbest, part of the Chinese conglomerate Sanpower, for £71mln and then purchase £69mln in new shares to be issued.
The deal is subject to approval from bondholders and shareholders as well as the completion of a restructuring, which includes the closure of about 20 stores.
C.Banner expects sales at House of Fraser to stabilise after completing its restructuring plan.