M.T. WALLETTE, our retailing correspondent, on the latest piece of almost good news for Croydon town centre, as the chairman of one department store talks of the ‘existential threat’ to business on the High Street
Croydon’s House of Fraser, the town centre’s last remaining West End-style department store, was given a reprieve this morning when it was not listed for closure as part of its parent company’s attempts to stay in business.
But the Croydon store’s future is by no means secure, and much will depend on what deals can be cut over rents with its landlords at Centrale, and the outcome of a crucial vote by creditors on June 22.
House of Fraser announced this morning that it is to close 31 stores, including its flagship Oxford Street store, as part of a desperate rescue plan. In total, around 6,000 jobs will go under the proposal. The 31 outlets will close by early next year under a company voluntary arrangement, or CVA, a form of insolvency that enables a business to rearrange deals with landlords. Creditors are set to vote on the deal, which includes reducing rents by 25 per cent, in a fortnight’s time.
“The retail industry is undergoing fundamental change and House of Fraser urgently needs to adapt to this fast-changing landscape in order to give it a future and allow it to thrive,” said Frank Slevin, House of Fraser’s chairman.
Slevin’s remarks will send a chill down the spines of Croydon’s Glee Club, whose glasses of Waitrose prosecco might still have a slight fizz following last week’s announcement that John Lewis will, eventually, be opening a store in the long-talked-about £1.4billion Hammersfield redevelopment of the town centre, which includes Centrale.
But that won’t be for at least another five years. The reality on the High Street today is far bleaker, as Slevin said: “Our legacy store estate has created an unsustainable cost base, which, without restructuring, presents an existential threat to the business.”
In Croydon, John Lewis is understood to have been offered five years rent-free to move into the planned Westfield on the site of the old Whitgift Centre.
Marks and Spencer – who are also in the midst of a series of store closures elsewhere in the country – are said to have been given especially generous terms when they agreed to sell their current North End store and move into a new building proposed under the Hammersfield scheme. House of Fraser may expect – and need – similarly generous terms if they are to remain in Croydon.
The House of Fraser rescue package needs approval by a majority of the company’s landlords – including Hammerson, owners of Centrale, and Westfield’s Croydon “partners”. But that is by no means a foregone conclusion.
ITV’s business correspondent, Joel Hills, was reporting this morning: “Not so long ago House of Fraser was busy flogging its department stores on ‘sale and leaseback’ deals to the same landlords it now wants to accept heavy losses.
“There’s anger out there. One landlord has told me they’ll vote against CVA and ‘take my chances in administration’.”
If House of Fraser cannot get the CVA deal past their creditors later this month, it could be that all the stores, including Croydon’s, will have to close. The loss of the House of Fraser would rip the guts out of Centrale, with more than a year to go before even the prospect of work starting on the rebuild of Croydon’s town centre.
Business analyst Richard Lim, of Retail Economics, responded to the House of Fraser move today by saying, “Department stores are incredibly expensive to operate and the last few years have seen costs spiraling upwards from business rates, rents and National Living Wage. These traditional retail business models that hold huge fixed costs are simply becoming unsustainable for some retailers.
“The announcement to close such a significant number of stores highlights the unyielding shift towards online shopping and the over-capacity concerns faced by a significant proportion of the market. The retailer will need to push forward right-sizing initiatives and utilise any excess space to sweat assets more effectively in a move to become fit-for-purpose in today’s digital age.”
Remarks which will hardly inspire confidence in the future of the long-awaited Croydon Westfield, with or without John Lewis.
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