As is so often the case, it was Sky’s Mark Kleinman who first revealed Sports Direct’s Mike Ashley was closing in House of Fraser after it went into administration after 169 years. And mid morning on 10 August it didn’t take long for Sports Direct to confirm it had acquired all of the UK stores, brand and stock of House of Fraser.
But there are numerous questions that need to be asked here.
Andrew Teacher, founder of Blackstock Consulting, said:
“One question not really being asked by the media is why companies like House of Fraser ended up with such ridiculous long leases – some in excess of 40 years – at extortionate rents; contracts that have combined with soaring rates bills to drive them under. The answer is that previous company owners would have sold off freeholds to stores and leased them back from the people they them sold to, with those properties being worth far more if the leases were long and inflation-linked. This enabled those owners to extract huge dividends and is all perfectly legal, with huge fees paid to property agents along the way.
“House of Fraser’s sale for £90m to Mike Ashley – far more than the £23.6m spent on transfers this summer by Newcastle United, which he also owns – implies there’s a huge amount of value to be extracted across the company’s asset base of over £400m. Much of this will come out in the wash, but what’s clear is that many creditors will have lost out through the administration process.
“If House of Fraser, or any of the other big retailers that have collapsed, were car plants, the government would have taken action years ago. As it is, our antiquated business rates systems – which has failed to evolve with the rise of online shopping – has taxed retail properties out of existence.
“Meanwhile, asset-stripping investment firms loading solvent businesses with debt to extract ridiculous dividends have been allowed to plough on, receiving knighthoods for their efforts. For customers, this means less choice and greater unemployment with further decimation of many struggling town centres.
“Something has to change.”