House of Fraser shows first signs of turnaround

House of Fraser, the struggling DH Evans and Dickins & Jones department store group, gave the first evidence that its long-awaited recovery is bearing fruit yesterday when it reported reduced first half losses and news that its new brand of own-label clothing is selling well. Nigel Cope, City Correspondent, reports.

Chief executive John Coleman, who joined House of Fraser last year, said sales and margins had improved and the company would have sold its troublesome backlog of unwanted stock by the end of the year.

He said: "We believe that the milestones we set out to achieve have been achieved either on or ahead of schedule. We feel confident that House of Fraser is on the right track." He was speaking as the company reported losses of pounds 1.8m in the first half compared to pounds 13.6m in the same period last year.

Sales rose by 3.8 per cent on a like-for-like basis and by 5 per cent in current trading, though September sales were affected by the shopper malaise which followed the death of Diana, Princess of Wales.

Chairman Brian McGowan, who has said he will "fall on my sword" if there are any further slip-ups at the accident-prone group, said he was encouraged about the performance but would stand by his pledge. "If things go wrong I will have to say `Well I gave it my best shot', and that it is time for someone else to have ago."

He said the priority for House of Fraser was to drive margins higher rather than concentrate on sales growth. Margins have been boosted by higher sales of the company's own-bought ranges. In-store concessions have been moved to less prominent parts of House of Fraser's 51 department stores as the company seizes the best trading areas for its own merchandise. "The concessions have had it easy for too long at House of Fraser," said Mr McGowan.

Sales of the new Linea clothing brand, which was launched in July, are exceeding even the company's most ambitious expectations. Mr Coleman said sales per square foot in the areas devoted to Linea were 80 per cent higher than the rest of its own-bought womenswear space.

The long-running problem of unsold stock is set to be removed by the end of the year when the company says all the excess, discounted stock will be sold. Part of last year's pounds 53.2m provision will be drawn down to cover the costs.

House of Fraser shares, which were priced at 180p when the company floated in 1994, closed 1.5p higher at 216.5p.

Investment Column, page 27

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