House of Fraser drives efficiencies as part of new five-year strategy

House of Fraser has hired external consultants to help drive efficiencies in its supply chain and distribution network, as part of a new five-year strategy set to be unveiled in February.

It includes abandoning plans for a new distribution centre in Peterborough, choosing instead to focus operations around existing sites in Wellingborough and Milton Keynes, as well as embarking on a transformation plan to optimise the supply chain from factory gate to shelf, led by chief information officer Julian Burnett.

The business presented the new strategy to its Chinese owner, Sanpower chairman Yuan Yafei, on the Friday before it was confirmed that chief executive Nigel Oddy had decided to leave the business.

His intentions to leave came as the firm was gearing up for the all-important peak trading period, when HoF typically delivers around 85% of annual profit.

Oddy told Drapers today that he has spent 20 years at Marks & Spencer and ten at HoF and wanted a new challenge in his career, before the firm embarked on the five-year strategy. He is expected to leave next April or May and the firm has started a process to replace him, which is thought to include both internal and external candidates.

The new strategy, described as “transformational for the business” by executive chairman Frank Slevin, is focused around the customer experience and maximising its existing store estate.

HoF is tied into long leases on most of its 60 stores in the UK and Ireland so has no intentions to scale back, Drapers understands. The plan will see better use of the locations such as reducing space dedicated to legacy offices and stockrooms harking back to days as regional flagship stores, which are no longer required due to centralised services.

It will also look to improving the food and beverage offer in stores to provide a more engaging and memorable experience. House of Fraser once had a deli area in the basement of its Oxford Street store and is considering the return of this type of concept.

Slevin is also chairman of toy retailer Hamley’s, which is owned by C.banner, a strategic partner of Sanpower that is run by Yuan’s brother-in-law Chen Yixi, and chairman of US gadget retailer Brookstone, which was also acquired by Sanpower in 2014.

He is looking to further synergies between the businesses, by enhancing the mother, baby and child service offer through Hamley’s, as well as the men’s experience through Brookstone.

Hamley’s now has six concessions in HoF stores with plans for more, and Slevin believes HoF could learn lessons in experiential retail and “selling magic” from the toy retailer. There may also be opportunities to introduce gadgets such as travel adaptors and earphones from Brookstone into HoF stores.

He maintains that HoF has been under invested in for the decade before Sanpower took power in 2014, citing the example that just £30m was invested in CAPEX in the two years prior to the takeover while more than £90m has been invested since that date, with additional funds from brand partners.

Some 12 stores including regional outposts including Darlington, Shrewsbury, Belfast and Metrocentre have seen updates and Drapers understands that this programme will continue next year, although the pace of investment may slow somewhat.

HoF is poised to launch a new store at Rushden Lakes in Northampton in the second half of next year, which will not be a blueprint for the future but will allow the retailer to test some concepts that could be rolled out across its estate. Due to the nature of its diverse set of stores, it plans to introduce concepts on a case-by-case basis that are tailored to each location and catchment area.

The firm has seen a slew of departures since its acquisition by its Chinese owners, including chief customer officer Andy Harding, chief executive John King and finance director Mark Gifford.

But it has since made “key hires” including David Walmsley, who joined as chief customer experience from Marks & Spencer’s digital business in the summer, and Maria Hollins, a former Asos trading director, who is executive director for product and trading.

The executive team also includes Burnett, chief finance officer Colin Elliot, chief operating officer Peter Gross and Peter Hearsey, executive director for legal and property.

Ray Kavanagh, also part of the executive team with responsibility for commercial and logistics, is understood to be at risk of redundancy.

Sanpower’s ownership has been the subject of swirling tales of the chairman’s autocratic nature but Slevin is keen to dismiss these “unsubstantiated rumours”. He maintains Yuan is an “energetic advocate of the business” and has been “enormously supportive”, while noting that Sanpower has not sought to install one of its executives on the board or exert any undue pressure. “There is no one in China saying this season’s new black is green, for example,” he said.

He also underlines that Sanpower has not tried to take any dividends and rejected an assertion that it has gone back on requests for a cash injection, as well as that there is a cultural mismatch between the two firms.

It comes as HoF is poised to open its first Chinese store in Nanjing on 21 December. Hamley’s opened a store nearby last month, while Brookstone will also open in the same location and Slevin will be there to cut the ribbon.

“The store set new records for Hamley’s so we are pretty positive about the opportunities there,” he said. The Nanjing store is one of three initial stores planned followed by one in Xuzhou, which was delayed by the building of a subway under the store but is expected to open in the third quarter, and a third in Chongqing.

Slevin, who acknowledges he is not a retailer at heart, is feeling bullish about the opportunities ahead for the 167-year-old business, buoyed by a 2.7% increase in sales compared to last year for the six-day promotional period over Black Friday that ran until 23 November.

The new five-year plan is an acknowledgment of trends such as a consumer shift from spend away from retail into leisure and aims to position HoF “ahead of the curve, rather than behind it”.

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