Doubts are growing about the number of House of Fraser stores Mike Ashley will keep open as landlords lose patience with him paying no rent while he decides what to do with the spaces.
The retail tycoon said he hoped to save about 80% of House of Fraser’s 59 stores and turn the chain into the “Harrods of the high street” after it was bought out of administration for £90m last August by his leisurewear business Sports Direct.
But the landlord of Rackhams in Altrincham, part of the HoF empire, has served Ashley a notice to leave the premises and said others could now follow suit.
M&M Asset Management, which owns the Stamford Quarter shopping centre that includes the store, agreed to accept no rent for a year under a short-term lease, one of dozens of similar contracts thought to expire in September.
Iain Minto, M&M’s shopping centre director, said the company could not give Ashley any more time to decide on the site’s future and had decided instead to redevelop it as flats and smaller residential units.
“We can’t sit around and wait forever for House of Fraser to do something,” said Minto.
“Sports Direct have been in this building for nine months and at the moment they’re still trying work out what to do with the wider business. We don’t want the building to sit there forever and a day, we want to invest in the town.”
He added: “You have to bear in mind that there are nearly 60 House of Fraser stores across the company. I imagine there will be other landlords with House of Fraser, scratching their heads wondering what to do with the space.”
Retail insiders believe Ashley may only be interested in keeping 40 stores and is still weighing up which ones are likely to be sustainable in the long term.
To date, he has acquired the landmark Frasers building in Glasgow for £95m, closed five stores and made deals on at least 37 others, though many of these are only one-year agreements like the one on the Altrincham shop.
Under these short-term deals, many landlords have agreed to accept low rents or nothing at all, rather than take back the properties, which would force them to pay business rates borne by the tenant.
Tim Hance of HRH Retail, a consultancy that advises M&M and many other landlords, said: “Every competent landlord out there is going to be looking at what they can do.
“Landlords aren’t in it to let shops for nil rent. They’ve got loans that have to be serviced and they can’t do that with no income.”
Richard Hyman, a veteran retail analyst, said it was likely that despite Ashley’s rhetoric about saving House of Fraser, the tycoon was unlikely to be concerned at the prospect of losing stores.
“People may have been naive to think that these shops would be saved as retail businesses trading as House of Fraser, which is clearly not viable as it is.
“I suspect that Ashley has sold a big chunk of the stock he bought and that was the pivotal element in the transaction to him.”
Hyman added that many of House of Fraser’s landlords were in a weak position, given the difficulties facing the bricks and mortar retail sector, and would struggle to fill empty premises if Ashley had no interest in keeping them going.
“Landlords will make much less money from retail tenants than they have in the past, that’s a certainty because retail is becoming less profitable.
“Some of these sites will not be occupied this time next year and will not be House of Fraser. How many department stores are looking for new sites? In fact they’ve got far too many.”