Shakeup talk boosts Fraser

INVESTMENT COLUMN

House of Fraser has been such a disaster since it came to the market two years ago that something clearly had to give. If yesterday's speculation is true, then that something is going to be the management.

The rumour is that David Dworkin, the banana-chomping American who ran Storehouse a couple of years ago, is set to return from the US and join House of Fraser as chief executive. The company denied any plans for management changes but time is clearly running out for managing director Andrew Jennings and chairman Brian McGowan. Four profits warnings in two years have caused institutional investors to lose patience and if there is a push for boardroom changes, that is the likely source.

Management changes, rumoured or actual, usually breath life into even the most moribund of shares and House of Fraser has proved no exception. They bounced up 11p to 188p yesterday, one of the few times in the last year that they have poked their nose above the 180p issue price. If Mr Dworkin did sign up, his appointment would be viewed positively by the City which remembers his good work at Bhs and Mothercare.

But he would have his work cut out. House of Fraser's 50-odd department stores have had a rum time due largely to buying mistakes which have left the stores full of unwanted coats again this year and the inability to grow the House of Fraser own brand as hoped.

At 188p the shares still look over-valued on fundamentals. The appointment of Dworkin would give a short term fillip to the price but its recent strength has owed more to takeover speculation and rumours of management changes than any evidence of a trading recovery.

BZW is forecasting profits of pounds 13.5m for the current year, which puts the shares on a recovery stock forward rating of 43. More than high enough.