Ashley slams HoF’s previous management amid buyer’s remorse
Mike Ashley, Sports Direct ceo and majority shareholder has severely criticised the previous management of House of Fraser and said politicians are failing the country economically.
‘During the financial year we acquired the trade and assets of House of Fraser for £90m, invested close to that to kick start the supply chain and signed up to the £95m purchase of the flagship Glasgow Frasers store to show we were serious with our investment and strategy. However, as we have continued to look under the bonnet as we integrate the business, we have found that the problems are nothing short of terminal in nature.
‘Serious under investment in stores and appropriate support services, excessive and unsustainable outsourcing and financing, and selling brands to their Chinese parent shortly before administration are just some of the many problems faced. The previous chairman, Frank Slevin exemplified city greed and excess, and as House of Fraser's future became terminal with people losing their jobs and with more to follow, Mr Slevin thought it suitable to retain these extravagances not appropriate to a business in its death spiral.
‘There was the widely publicised closure of the website and warehouses as we tried to get the business moving in the first days after the acquisition which meant the business was starting on the back foot as we tried to save jobs and stores. Despite the frustration on our part we understand the position the likes of XPO were put in when being so fantastically out of pocket because of the previous management's mixture of misplaced optimism or worse, downright lies.
‘As well as support services suppliers, the brands within House of Fraser had taken a significant hit when the company went into administration. Again based on either misplaced optimism or falsehoods from House of Fraser management, the brands put more skin in the game than management deserved and paid a price for their loyalty. We had to quickly work with these brands to get the business moving again and restore trust and I am pleased and grateful to say that the vast majority of brands understood we were here to help, our vision for the future, and saw a mutually beneficial opportunity going forward.
‘We have done as much as we could realistically do to save as many jobs and stores as possible, and indeed we appreciate many landlords and local authorities have worked hand in hand with us as we tried to do this. However, there are still a number of stores which are currently paying zero rent and that are still unprofitable and unfortunately this is not sustainable. We are continuing to review the longer-term portfolio and would expect the number of retained stores to reduce in the next 12 months.
‘On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1, albeit we are trying very hard to turn the business around this will not be quick and it will not be easy. Even though we do believe there could be a bright future for House of Fraser, and indeed have publicised our Frasers vision which we are very excited about, if we had the gift of hindsight we might have made a different decision in August 2018.
‘Unscrupulous and/or incompetent management have in this case, and in others within the retail market been shown to be largely untouchable by authorities or stakeholders.
‘The current bricks and mortar retail market is in dire straits and without substantial support from the Government in particular it is in a terminal state. I noted at the Commons Select Committee in December 2018 that the patient was at the bottom of the pool, nothing has happened since then to indicate a change in fortunes in the British high street. The MPs who showboated, and in the case of MP for Slough, Tanmanjeet Singh Dhesi, lied regarding what I said about saving House of Fraser stores, rather than being interested in saving the high street showed that they are either not interested in genuinely helping the high street, are incapable of doing, or are so distracted with other matters such as Brexit as to not have time to do anything about it. Unfortunately, I would have sympathy with the raft of issues being dealt with in parliament if I felt they were being handled as best they could, I believe I am in the majority in this country when I say the government and members of parliament from all sides are failing this country economically.
‘To illustrate how serious the situation is on the High Street, alongside the almost weekly administrations, CVAs, frauds, and profit warnings, the British Retail Consortium showed May 2019 as the worst on record. The Sports Direct Group is not immune to this and indeed if not for the Elevation Strategy we implemented in recent years we would be looking at significant problems in the future. None-the-less, our UK store contribution likes are down 1.6% and we would expect these to be some of the rosier figures from the High Street. Myself and other voices in the retail sector have already noted loudly and clearly some of the measures that should be undertaken to help save high streets, these include an extra tax on online and reform of the business rates regime. Following on from this, and echoing sentiments from others in the sector, CVAs now seem to be being used carte blanche to penalise creditors and landlords and by extension lead to the more successful retailers subsidising the rotten ones.’