House of Fraser warns of price war

JOHN COLEMAN, the chief executive of House of Fraser, yesterday warned that the recent troubles at Marks & Spencer could damage other department store chains.

Mr Coleman said that M&S's decision to cut prices on many products in response to a slump in sales could force other retailers to cut their prices.

"We take no pleasure in Marks & Spencer's problems. There is some negative impact for the whole of the fashion sector. Because of M&S discounting, people could get accustomed to discount buying," he said.

Mr Coleman's remarks came after House of Fraser, which owns the Army & Navy, Dickins & Jones and DH Evans chains, posted a 33.4 per cent slump in 1998 pre-tax profits to pounds 19.3m despite a marginal rise in like-for- like sales. The profit shortfall was caused by a sales slowdown in the second half of the year and by an increase in costs.

The chairman, Brian McGowan, said that the company decided to maintain its investment in upgrading its supply chain despite the tough market conditions.

Mr McGowan also announced that he was to step down in June after nearly six years in the post. He is to be replaced by Robert Shrager, a former director of electrical retailer Dixons.

Mr Coleman said the group's 50-strong chain had seen an 0.5 per cent rise in sales in the first seven weeks of the new financial year. It would reap the benefits of the supply-chain overhaul this year, he said: More than pounds 4m would be added to profits in 1999, with a further pounds 15m to come in 2000.