House of Fraser entered administration last week, but after being bought out by Sports Direct, its troubles are far from over, with its website being pulled down overnight.
Sports Direct bought British department store House of Fraser for £90m for last week, just hours after it went into administration. Mike Ashley, founder of Sports Direct, vowed at the time to keep 80 percent of the chain’s 59 stores open (even the 31 stores that were previously destined for closure). Now the embattled department store is facing further problems, pulling its online store amidst snowballing complaints from customers about failed or delayed deliveries.
“We’re currently working hard to make some improvements to the website,” the homepage optimistically reads. “Don’t worry, we will be back up and running as soon as possible. While we’re otherwise occupied, check out our social channels below to see what we’ve been up to.”
The delivery delays can be attributed to disputes with warehouse operator XPO Logistics which had halted all processing of orders amid disputes over outstanding payments. XPO operates the warehouses that handle all House of Fraser online deliveries direct to customers as well as logistics to stores. Access to these warehouses has also been closed.
XPO is just one of the thousands of suppliers which House of Fraser has written to saying it will not cover money owed ahead of Friday, when Sports Direct brought the business out of administration. It has been reported that suppliers are owed more than £60m. Brands such as Jigsaw and Karen Millen have also been pulling their stock while negotiating these payments.
In terms of the legality of non-payment when there are debts that are part of an administration, Sports Direct actually has no obligation to pay these suppliers, and they are not expected to recoup more than 3p to every £1. Yet as a matter of best practice and to continue business relationships, new owners often attempt to negotiate reasonable repayment of debts. It’s a tricky balance to get a business back on track when enormous depts are at play while keeping suppliers content.
Ashley said after the purchase that he has plans to turn the department store chain into the ‘Harrods of the high street’, yet transformation seems unlikely without the goodwill of the retail brands and warehouse operations.
‘‘Mike Ashley could harness his mixed portfolio of retail businesses to transform House of Fraser, combining his more premium fascias Agent Provocateur and Flannels, which sells brands like Burberry London, Fendi and Sophia Webster, to create a more upmarket department store,” said Sofie Willmott, Senior Retail Analyst at GlobalData. “Although very few of House of Fraser’s own brands remain, those such as Issa and Biba would slot into this new format.’’
Sports Direct said on Wednesday it was “committed to creating stability as soon as possible and building exciting plans for the future.” With the online store offline and the competition circling, vying to lease House of Fraser’s current sites, stability better come sooner rather than later.
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