House of Fraser plans to spend pounds 50m on overhaul

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John Coleman, new chief executive of House of Fraser, launched a searing attack on his predecessors at the department store chain yesterday.

Announcing a pounds 50m restructuring programme, he blamed poor customer service, inadequate market knowledge, weak buying and poor internal systems for the company's collapse to a pounds 13.6m loss in the half-year to July.

Between five and 10 of the company's 50 stores face the axe as a result of a strategic review of the group, putting more than 1,000 of House of Fraser's 9,500-strong payroll at risk.

House of Fraser's shares closed 4.5p lower at 158p as the City focused on the size of Mr Coleman's task in rejuvenating the retailer, only three years after it came to the market at a price of 180p.

A collapse in sales of the group's "own bought" womenswear, which traditionally attracts a higher gross margin than sales from in-store concessions, lay behind worse-than-expected losses for the half year.

Womenswear accounts for almost a third of House of Fraser's sales, and Mr Coleman admitted the company had made serious errors in that department.

Brian McGowan, House of Fraser's chairman, who came out of retirement to head the company just before it floated in 1994, dismissed the suggestion that he should take responsibility for the failings highlighted by Mr Coleman.

"It is a question of the role of the non-executive chairman," said Mr McGowan, who made his reputation at the Williams industrial group.

"He is not there to be operational, not even to create a strategy. He is there to review the effectiveness of that strategy and the ability of the executives to carry it out. If he believes they are not up to it, or there is a flaw in the strategy, then it is his responsibility to change the management. That is what I did."

Analysts questioned whether Mr Coleman had the necessary track record to turn round House of Fraser, which has seen its profits fall since flotation, has been losing market share to Debenhams and John Lewis, faces cash outflows and rising debts and has a host of operational problems to resolve.

Mr Coleman admitted that prior to his strategic review, the company, whose portfolio of stores includes such famous retailing names as DH Evans, Barkers and Rackhams, knew little about its customers, had unacceptably high staff turnover in key areas such as the buying office and suffered from poor planning which had led to bad stock control and discounts to clear badly received lines.

During the half-year under review, sales were up marginally to pounds 334.7m (pounds 322.6m).

A trading loss of pounds 2.5m (loss of pounds 1.8m) was compounded by a pounds 6.7m one- off property write-off and higher interest payable of pounds 4.4m (pounds 3.8m) to leave a pre-tax loss of pounds 13.6m compared with last year's pounds 4.3m shortfall.

Investment column, page 21