LONDON — Struggling British department store chain House of Fraser has a new Chinese owner: C.banner International Holdings, a retailer of mid-to-premium footwear brands in China and parent of the Hamleys toy store chain.
C.banner has taken a 51 percent stake in House of Fraser, which has annual sales of 1.3 billion pounds, 59 locations across the U.K. and Ireland, and one unit in Nanjing, China. Nanjing Cenbest, part of the Sanpower Group, will remain a significant minority shareholder in the British group.
The terms of the deal, which is set to complete by the end of June, were not disclosed. On Wednesday, House of Fraser confirmed it plans to shut some stores through a voluntary insolvency agreement. The store portfolio restructuring, it said, will be completed by early next year.
House of Fraser had long been looking for a buyer, and in March it appeared as if Sanpower owner Yuan Yafei was going to sell it to Wuji Wenhua, a tourism development company but that deal never came to fruition.
Yafei, who acquired House of Fraser in 2014, has been struggling with shrinking sales and has repeatedly failed to deliver on his promise to invest in the U.K. and expand the chain in Russia and the Middle East. In China, Yafei’s grand plan was to open 50 stores under the “Oriental Fraser” banner. He opened one in the region.
Earlier this year, the retailer had begun asking for rent reductions on some of its 59 U.K. stores. It lost its credit insurance, and also had its credit rating downgraded by Moody’s.
As part of this latest transaction, C.banner will subscribe for new shares in the company and has vowed to provide “vital capital to accelerate the board’s transformation plans,” a statement said.
In China, C.banner manages its own brands and others including Eblan, Sundance, Mio and Badgley Mischka. It also sells Steve Madden shoes through a joint venture company. It has other retail operations, including the Hamleys, whose flagship is located on Regent Street in London.
Frank Slevin, chairman of House of Fraser, said the acquisition, the new capital and restructuring, “represent a step to securing House of Fraser’s long-term future.”
He added that due to “seismic shifts” in the U.K. retail industry, “there is a need to create a leaner business that better serves the rapidly changing behaviors” of customers who regularly shop via multiple channels.
“House of Fraser’s future will depend on creating the right portfolio of stores that are the right size and in the right location. C.banner’s investment is a vote of confidence in our prospects,” Slevin said.
House of Fraser is not alone in struggling with rapidly changing consumer habits in the U.K.
Earlier this week, Sainsbury’s and Asda revealed plans to merge, partly in a bid to streamline and leverage their joint store portfolio, up their digital game in the face of threats from Amazon, appeal to consumers’ needs for speed and convenience, and fend off the German discounters Aldi and Lidl.
British fashion and non-fashion retailers alike have had been impacted by issues such as higher sourcing charges due to the decline of the pound since the Brexit vote, low consumer confidence, declining footfall and expensive leases. In March, British stores such as Toys ‘R’ Us, and the electronics store Maplin announced they were closing as a result of those pressures.
Last month, Debenhams announced an 85 percent decline in first-half profits to 87.8 million pounds, with like-for-like sales down 2.2 percent against “a challenging U.K. market background.”
Marks & Spencer has also been closing stores, and last month it said it was shutting a major distribution center in northwest England as part of a plan to create a single-tier network that will enable it to move products from suppliers to stores faster, and at a lower cost.