House of Fraser has slower Christmas but price focus boosts margins

By

Sandra Halliday

Published
Jan 11, 2018

House of Fraser faced the same challenges endured by much of UK retail over the six-week Christmas period with a slow performance in stores. But unlike some, its web sales also proved weak.

However, a focus on maintaining margins helped it through and that disciplined stance should boost the bottom line.

HoF’s trading update Thursday covered the six weeks to December 23 and sales fell 2.9% over the period. But in line with the shift of the season towards shopping in late November, the firm said that its Black Friday event saw store sales rising 0.8%.

The bad news was on e-tail. While many UK retailers saw buoyant e-commerce sales this season, at HoF they fell 7.5%. However, again it was stronger around Black Friday with sales “within 1% of last year’s record performance.”

Importantly, that focus on price maintenance fed through to a margin improvement with fewer discounts meaning an increase in the gross margin of around 0.5% over the period.

Margins improved online specifically too and in the four weeks to December 23, the “webstore profit contribution of £6.1 million was in line with the previous year due to an increase in gross margin, combined with efficiency gains from investment in the logistics network.”

And what about the post-Christmas period? That wasn’t so good to start with and the first clearance week was “disappointing”. But since January 1, “sales have recovered and are broadly in line with last year in both stores and online.”

The company held back from putting too much of a gloss on the figures and admitted the market is tough while the business itself is one “in transition’.

But CEO Alex Williamson also said the company is focused on driving profitability “rather than chasing revenue at any cost. We are not a business determined to sell everything to everyone at any price.”

Williamson added that it’s important sell products customers will want and that can help the business make money.