House of Frasers CVA proposals have been approved by the companies’ creditors

House of Fraser's CVA proposals have been approved by the companies’ creditors

House of Fraser has announced its company voluntary arrangement (CVA) proposals have been approved in a move that means 31 of its 59 stores are due to close, affecting 6,000 staff members.

In an announcement earlier this month, the UK department store retailer said it is seeking approval from creditors on a plan where a reduction in its store number will provide the business with an effective platform for future growth.

The proposing of the CVAs followed an announcement made on 2 May, of C.banner's conditional agreement to acquire a 51% stake in House of Fraser Group Ltd and intention to introduce significant new capital. The proposals, the retailer said, are "central to the significant restructuring of the business, without which House of Fraser does not have a viable future."

Now, following creditors' meetings for House of Fraser (Stores) Limited and House of Fraser Limited this morning (22 June), the retailer has confirmed that both CVA proposals have been approved.

"The restructuring which these CVAs enable is essential to both securing the company's future and accessing new capital from international retailer C.banner," it said.  "Following the restructuring, House of Fraser will have a more sustainable cost base and a platform for future growth to deliver an improved customer proposition."

House of Fraser will now begin the process of working with landlords and other stakeholders to implement the proposals, including the 31 stores identified for closure. All of these locations are expected to trade until early 2019.  

The move will affect up to 2,000 House of Fraser colleagues and a further 4,000 brand and concession partners.

"The approval of the CVAs is a seminal moment in House of Fraser's history. We must now continue with the implementation of our restructuring plan," said chairman Frank Selvin. "This is also an important milestone in the transaction with C.banner and moves us toward the completion of the capital injection first announced in May."

Meanwhile, CEO Alex Williamson said the decision was not one that was taken lightly.

"The CVA proposals have been approved by our creditors and we are grateful for their ongoing support and belief in the future of House of Fraser. This was clearly a difficult decision to take but is, ultimately, the only one to secure our future. Our focus is on supporting all of our affected colleagues and we are exploring every opportunity available to them working alongside the Retail Trust and the wider retail community," he added.

The news follows an announcement by the retailer yesterday that it plans to renew its product and trade strategy while keeping its core focus on offering the "best selection" of contemporary brands.

In a statement, House of Fraser said the plan will focus on ensuring it is a "destination for customers to shop the brands they love" while providing a "premium experience" both online and in store.

As part of wider cost-management efforts, the retailer said it is focusing on areas of growth within the business and wider sector. Kantar Worldpanel reports an increase of GBP208m (US$275.6m) for on-branded products in the last year while own label products are seeing a decrease year-on-year.

The announcement follows an initial step by House of Fraser last year towards consolidating its own brands to focus on the most fashion-forward products.

Meanwhile, the retailer says it will become more agile in responding to trends and deliver exclusivity through partnerships with popular concessions. It plans to invest in trend-spotting and product innovation capabilities alongside its recently launched globally responsive supply chain.

"Since joining House of Fraser, I have worked with the team to review our current product offering and what became crystal clear is our customers love brands. Customers now want more from their shopping experience and as a business, we need to make sure we are exceeding expectations," explains David Walker-Smith, chief product and trading officer. "I'm really looking forward to embarking on this new chapter for the business and working with both our existing and new partners to bring an exciting proposition to stores and online."