1 Howick Place
We have laid the foundations for sustained long-term growth--through our programme of refurbishments, our plans for new stores, our continuing focus on international designer brands, and our ever-greater understanding of customers' needs.
House of Fraser PLC bills itself as the United Kingdom's leading retailer of designer brands--the department store chain boasts nearly 2,000 of them, including a number of popular in-house brands featuring the company's own designs. House of Fraser operates 52 department stores throughout the United Kingdom under a variety of signages, including 15 House of Fraser and six Rackhams stores, but also including Army & Navy Stores, Arnotts, Barkers of Kensington, Binns, Cavendish House of Cheltenham, Dickins & Jones, Dingles, DH Evans, David Evans, Frasers, Hammonds, Howells, Jollys, Kendals, and Schofields. Many of these store names operate as a strictly local or regional business, and often represent a single store. Yet the company's past attempts at rebranding its stores under a common name has usually met with strong local resistance. House of Fraser's average store size stands at around 100,000 square feet, although its largest stores reach more than 300,000 square feet. The company sells a full range of home furnishings in most of its stores (its smaller stores have fewer departments), including furniture, appliances, housewares, and linens, but clothing--and especially women's clothing--makes up the bulk of its sales. The company has performed a turnaround in the new millennium, reorienting its image as an up-market, fashion house; the company also has been pursuing an ambitious refurbishing program as it revamps many of its aging stores. Meanwhile, House of Fraser has embarked on a new expansion drive at the beginning of the century, calling for the addition of five new stores by 2003--and acknowledging its interest in acquiring some of its smaller competitors.
Founding a Department Store Empire in the 19th Century
The House of Fraser started out as a small draper's shop in Glasgow, Scotland. In 1849, Hugh Fraser, who had completed his draper's apprenticeship, joined with partner James Arthur to open their own store, called Arthur & Fraser, in Glasgow's Buchanan Street. After Fraser died, his sons took over the business, changing the store's name to Fraser, Sons & Co. in 1873. Over the decades, the store began adding more items, then new departments, eventually becoming a full-fledged department store.
The future Lord Hugh Fraser, representing a new generation of Frasers, was born in 1903 and left school to join the family business. In 1941, Hugh Fraser was named chairman and managing director, which at the time still consisted of the single Buchanan Street store. Yet under its new chairman, the store--and the company--was to undergo substantial growth, and by the early 1960s was to become the preeminent department store group in the United Kingdom.
Fraser began adding new stores in the years following the war, and by 1948, the year the company went public, Fraser had already built up a chain of 15 stores. The following decade was to see still stronger growth, primarily through acquisitions.
In 1953, Fraser acquired the Binns chain of stores, a company that had started out with a single shop in Wearmouth in 1836. The Binns acquisition proved merely a prelude to a larger acquisition. In 1959, the House of Fraser, as the company had come to be called, acquired the Harrods department store chain. Harrods, like Fraser, had been founded in 1849. Originally a grocery centered in Knightsbridge--which at the time was located outside of the city of London--Harrods was to grow into the United Kingdom's most prestigious department store, with departments stretching out across more than 20 acres. Founder Henry Charles Harrod sold the business to his son, Charles Digby Harrod, in 1861, who sold the business to an investment group, which changed the store's status to that of limited liability company.
Harrods began expanding beyond its single store, acquiring other store chains, such as Dickins & Jones in 1814. That store had been established in 1790 on London's Oxford Street before moving to its Regent Street location in 1835. Harrods later went on to take over Rackhams, founded as a drapery shop in Birmingham in 1851 before expanding to become a small, regional chain of department stores. Another addition to the Harrods empire was the DH Evans stores, which had been founded in 1879 and which opened a London store in 1932.
The addition of Harrods transformed Fraser into a major force in British retailing. Although the company's department store chain now stretched out across most of the United Kingdom, the company's Harrods store remained what Lord Fraser called its "jewel in the crown." The House of Fraser grew as the British economy recovered from the devastation of World War II and entered a new phase of prosperity, with higher living standards, greater leisure time, and technological advancements stimulating a new spirit of consumerism. Meanwhile, Lord Fraser himself had expanded his personal interests, developing an empire of holdings that made him the most successful businessman in Scotland at the time. Fraser placed his holdings under the Scottish Universal Investments (SUITS) group, which also took a 30 percent stake in the House of Fraser department store chain.
Lord Fraser had been joined by his son, Hugh Fraser (later Sir Hugh Fraser), who had started with the business as a floor assistant at the age of 16 before taking over after his father's retirement in 1966. The company continued to expand, adding the Army & Navy store chain, which had originally been founded as a military cooperative in 1871 but opened to the general public in 1918 (due to the drastic drop in its membership following World War I). Other purchases followed, including the Cavendish House department store in Cheltenham and the Dingles stores.
Yet Sir Hugh Fraser took over the House of Fraser at a time when the British consumer was beginning to abandon the country's large-scale and often stuffy department stores in favor of smaller, trendier shops. The House of Fraser's' large stores and failing sales led to too much sales space and too large a stock burden. The collapse of the economic boom in the mid-1970s, the result of the Arab Oil Embargo of 1973, hit the company all the harder. The company continued to make acquisitions during the 1970s, building its chain to more than 90 stores; yet by the end of the decade, the chain had lost much of its luster.
Jewel in Whose Crown in the 1980s
Meanwhile, Sir Hugh Fraser's personal fortune was declining rapidly as a result of mounting gambling debts. During the 1970s, Fraser began selling off shares in SUITS. When the stock market learned of Fraser's actions, Fraser went ahead and sold off the rest of SUITS to then friend Roland "Tiny" Rowland, a German citizen born in India, who was behind the South African Lonrho conglomerate, but who remained a controversial figure in the British business community. Sir Fraser, who received £7 million from the sale, had agreed to the sale in part because he believed Rowland's promise that the purchase was to remain a simple investment.
Yet Rowland's real interest was quickly revealed to be the House of Fraser, specifically its Harrods department store. Fraser, who was ultimately dropped from the House of Fraser's board of directors, joined his company in resisting the South African raider. Rowland in turn launched what was described as a "guerilla war" against the company. Ultimately, however, Rowland was thwarted when the British Mergers and Monopolies commission blocked his attempt to gain full control of the House of Fraser.
In 1984, Rowland "parked" his 30 percent of House of Fraser with Egypt's Fayed brothers--or so he thought. In 1985, the Fayeds turned their back on Rowland and reached an agreement with the House of Fraser to acquire the rest of the company's shares. For this, the Fayeds paid £600 million. Rowland counterattacked, convincing friends in the British government to launch an investigation into the Fayeds (the investigation, the results of which were never published but later leaked, asserted that the Fayeds had misrepresented their wealth at the time of the House of Fraser purchase). Yet the sale stood and House of Fraser was taken off the public market.
Led by Mohamed Al Fayed (whose son Dodi was killed in the auto accident that also killed Princess Diana in 1997), House of Fraser began trimming its empire in the late 1980s and early 1990s. In 1988, the company sold off ten of its smaller department stores to the Sellar Morris Properties group for £6.5 million. Another group of medium-sized stores was sold off in 1989 in a £6 million management buyout. Not all of the company's actions during the period went toward trimming its ranks--the company acquired Schofields department store for £6.5 million at the end of 1988--yet the company, under Fayed's ownership, emerged as a trimmed down, modestly sized and, to many, rather dowdy department store group. By 1994, the company's chain of department stores had dwindled to only half its size in the 1980s. House of Fraser was lagging behind such competitors as Selfridges, Debenhams, and John Lewis in its sales-per-square-foot.
Pressed for cash, the Fayeds prepared to sell off House of Fraser in the early 1990s, keeping only the Harrods store as part of a growing collection of landmark London stores and hotels. A new managing director, Andrew Jennings, was appointed to lead the store group. Jennings conducted a review of the company's operations and then set out to revamp its image. Among the changes made were the abandonment of a number of departments, such as haberdashery, fabrics, and knitting, and a re-centering of the company's focus on fashion. The company also restructured its stores, separating them into three groups according to size in order to refocus its product offering. House of Fraser also began renovating a number of its stores, including the Frasers store in Glasgow, the Howells store in Cardiff, and the Dickins & Jones store in London, slated to become the company's new flagship store.
Rebirth of a Department Store Leader for the 21st Century
House of Fraser returned to the London stock exchange in 1994 and quickly ran into new economic troubles, seeing its profits slump into the mid-decade. In 1996, the company brought in a new chief executive, John Coleman, who promptly launched a new strategic review of the company. The result of that review called for a £50 million restructuring program, including the shutting down of a number of stores. The first three of these, including an Army & Navy store, a Binns department store, and the House of Fraser store in Sheffield, were closed in 1997, reducing the number of the company's stores to just 50.
House of Fraser now sought to restore its traditionally upmarket image and become recognized as a center for high-end designer fashions. Coupled with its new strategy, which saw the introduction of a vast range of designer labels, House of Fraser launched its own in-house brand featuring the company's own designs. Called Linea, the new label outperformed the company's expectations and helped to drive the company's growth through the end of the decade. The Linea range not only helped to increase the company's sales, quickly reaching more than 10 percent of the company's total fashion sales, but also gave it higher margins than its range of internationally known brand names. That label's success led the company to introduce two new in-house brands, Fraser and Platinum, in 1999.
By 1998, House of Fraser once again appeared to be in a strong position to grow. The company now began targeting fresh expansion through the addition of new stores. A first store was added in Northampton in 1997, while three more were slated to open by 1999. By the beginning of 1998, the company announced its intention to add 30 more stores in an expansion program that was estimated to reach a final cost of more than £300 million. Yet the company's expansion plans were hampered by a lack of financial muscle.
House of Fraser solved this problem in part by setting up a joint venture with British Land, called BL Fraser, which then purchased 15 of House of Fraser's store freeholds, which were then leased back to the department store group. The deal raised £171 million for House of Fraser and whet its appetite for a more aggressive growth strategy.
At the end of 1999, the company revealed that it had been carrying out secret talks to acquire smaller rival Allders, a group with 21 stores. The two sides could not agree on a price, however, and the deal fell through. Instead, House of Fraser pushed ahead with its new store openings, including a £20 million store to anchor the new Bluewater shopping mall near the "Chunnel" and sites in Sulliwell and Reading. In 2000, the company started the construction of a new store in London, to open on King William Street and to feature some 55,000 square feet of selling space. In that year, also, the company extended its Linea line of clothing fashions to include home furnishings, under the Linea Home name. The company launched the House of Fraser line of women's clothing, and a range of men's clothing, called The Collection. In addition, in 2000 House of Fraser discovered "Customer Relationship Management" and began to put into place a new program, including the rollout of a so-called "loyalty card" to attract and retain shoppers.
In September 2000, the company bought a store in Bristol from the Bentalls chain, paying £15.6 million. At the same time, House of Fraser announced plans to open three new stores in London, Norwich, and in High Wycombe, Buckinghamshire. The new stores were expected to open by 2004. By the beginning of 2001, however, the company already had added two new store sites to its list, at Croydon and Maidstone, and other negotiations were underway to develop three to four new store sites.
Despite the company's new commitment to organic growth--and despite its failure to acquire Allders--it had not ruled out other acquisitions. As Chief Executive John Coleman told the Guardian in March 2001: "Consolidation would still be a good thing. We are about as small as you can be [to operate efficiently] and there are lots of smaller players out there who cannot afford the investment in a systems and supply chain that we've put in over the last five years. There would be significant costs you could take out. We could support another 20 or 30 stores."
As it ended 2001, House of Fraser continued to book strong sales growth and expected to top easily the £847 million it had recorded in 2000. The company also continued its program of revamping its existing store park. In September the company unveiled a £30 million renovation of its flagship Rackhams store in Birmingham, which was to increase that store's selling space to more than 300,000 square feet and help it better to meet the coming competition with the redevelopment of the city's Bull Ring commercial district. In the years since its second public listing the company had succeeded in whipping itself back into fighting shape and planned to earn its self-proclaimed title as the United Kingdom's leading retailer of designer brands.
Principal Subsidiaries: House of Fraser (Stores) Ltd.; House of Fraser (Finance) Ltd; BL Fraser Ltd (50%).
Principal Competitors: Arcadia Group Plc; Debenhams Plc; Harrods Holdings; James Beattie Plc; Marks and Spencer Plc; N Brown Group Plc; New Look Plc; Next Plc; Otto Versand Gmbh & Co.; Selfridges Plc.
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