Mike Ashley’s Sports Direct has agreed to buy the House of Fraser department store chain for £90m.
The deal was announced just hours after the 169-year-old chain went into administration when talks with its creditors failed to reach an agreement.
Mr Ashley said his plan was to turn the 59-store chain in to the “Harrods of the High Street”.It employs 16,000, 5,900 directly and 10,100 in concessions. Administrators said jobs could be “preserved”.
While some stores did not open on time on Friday, initial problems with the website were resolved. There were reports, though, that gift cards were not being accepted.
Sports Direct commented that “The group has acquired all of the UK stores of House of Fraser, the House of Fraser brand and all of the stock in the business.”Sports Direct already held an 11% stake in the department store chain, which had been intending to close 31 shops under a now-abandoned restructuring plan.
House of Fraser’s administrators, from accountants EY, said the department store chain had been in “a race against time to secure sufficient funding to secure its future” ever since the Chinese firm started troubling earlier this month.
Before Friday’s deal was announced, 6,000 roles were to have been lost.Alan Hudson, one of the four administrators from accountants EY, said the Sports Direct deal “preserves as many of the jobs of House of Fraser’s employees as possible”.
“We hope that this [deal] will give the business the stable financial platform that it requires to flourish in the current retail environment”.But union officials at Unite said staff were entering “a period of great uncertainty and worry”.
Unite regional officer Scott Lennon said: “Sports Direct is a leopard that has not changed its spots and we hope that its poor record on pay and employment practices are not transferred to the House of Fraser.”
More stores may stay open. Mr Ashley said: “We will do our best to keep as many stores open as possible.”
“My ambition is to transform House of Fraser into Harrods of the High Street,” he said, indicating a move upmarket.”This is a massive step forward and further enhances our strategy of elevation across the group. This will benefit both House of Fraser and Flannels in the luxury sector,” he added.
There had been speculation he might take the opportunity to expand the Sports Direct chain, which he has previously said he wants to transform into “the Selfridges of sport”.
Analysts said he would need to spend more money. Sofie Willmott, senior retail analyst at GlobalData, said: “To give House of Fraser the best chance of survival, Sports Direct and its owner Mike Ashley must make drastic changes to both its product proposition and store environment to entice shoppers back.”
Kate Hardcastle, from the retail consultancy Insight with Passion, told the BBC a move downmarket was more likely.
“This is a big move and I’m sure lots of people will be breathing a slight sigh of relief that the name House of Fraser isn’t disappearing from the High Street altogether,” she said.
“However, I can’t imagine that the business or indeed its offer are going to be similar to that people know or recognise as House of Fraser – this is someone who deals very much in the discount market.”