Investment Column: Putting the House in order

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House of Fraser has been such a disaster since its 1994 flotation that shareholders who subscribed for shares in the department store group at 180p must be so battle-scarred that they are almost past caring.

Dogged by poor merchandise, under-invested stores and high staff turnover, the accident-prone retailer has only avoided being the whipping boy of the sector because Sears has been even worse.

The claim from the company is that the worst is now over and that the group can start to rebuild its fortunes. There have certainly been lots of changes.

In the boardroom alone, there is a new chief executive and finance director while the operations and merchandising directors are also new.

The strategy is being fine-tuned to try to boost the "own bought" merchandise which has been suffering from weak sales while the concessions business has been doing well.

Though the company was denying it yesterday it is really pinning its hopes on the launch of its new private label range in the summer. The new men's and women's clothing ranges are being designed to plug the gap between the high street names such as Next and Gap and designer names at reasonable prices.

It is certainly an area that needs improving. While concession sales grew by 15.8 per cent last year, own bought sales were only 2.5 per cent ahead.

This disguised terrible performance in womenswear, which fell by 14 per cent in the first half and only managed in 2 per cent uplift in the second.

In the store portfolio three are up for sale with one the subject of detailed talks. Others are being refurbished as they come under pressure from new branches of John Lewis and Harvey Nichols.

The company even admitted yesterday that the pounds 20m spent on upgrading the Dickins & Jones store in Regent Street would never be fully paid back in improved performance.

With analysts forecasting profits of pounds 25m this year the shares, up 0.5p to 165p yesterday, trade on a forward rating of 21. That reflects its potential as a recovery stock but investors should not hold their breath on this one.