House of Fraser makes long-delayed China debut

After an extended delay and the departure of key executives at its headquarters in London, the 166-year-old British retailer House of Fraser has finally made its debut in China.

Sanpower Group, the Chinese company that bought House of Fraser in 2014, has struggled since the acquisition to take the initial steps toward launching the brand globally.

This week’s opening in the city of Nanjing was originally slated for 2015 but the date was pushed back several times.

When Sanpower bought the UK department store chain for £155m more than two years ago, chairman Yuan Yafei laid out a plan to inject capital into the retailer and deploy an empire of new outposts in Russia, the Middle East as well as up to 50 new stores in China under the name “Oriental Fraser”.

The original plan for the brand in China, people with first-hand knowledge of House of Fraser and the deal told the Financial Times earlier this year, was to use Sanpower cash to invest in high-end real estate in cities across the country in which the new House of Fraser stores would be opened.

The Chinese company, which owns 89 per cent of House of Fraser, had also agreed to inject £75m into House of Fraser UK for things such as a technology revamp, the people said.

Instead, investment has flowed in the opposite direction, with the already cash-strapped UK operations paying for some of the developments in China, the company has said. Instead of buying or renting retail locations in China, Sanpower will convert some its own pre-existing shopping centres into space for House of Fraser.

The flagship store in Nanjing, which opened on Wednesday with a parade drummers in traditional bearskin hats, is sited in a Sanpower-owned shopping space.

According to a statement from Sanpower, the store occupies six stories and sells items from more than 300 brands. “House of Fraser China will replicate the heritage of House of Fraser from different stores and focusing on quintessentially English brands,” it said.

Sanpower did not respond to requests for any further comment.

The management of Sanpower and House of Fraser also have clashed amid the integration of the two companies. As of April, key personnel including House of Fraser’s chief financial officer and its chief customer officer had departed.

Sanpower has been on an acquisition binge over the past three years. It bought struggling US novelty gadget maker Brookstone for $173m in June 2014, just two months after House of Fraser. Later that year, Sanpower snatched up Israeli healthcare provider Natali for $70m. In November last year it agreed to pay $1.4bn for China Cord Blood, a New York-listed, China-based life sciences company.

Earlier this year it made a bid for McDonald’s China and Hong Kong franchise but eventually dropped out of the process.

House of Fraser has had a string of owners over the past 30 years, including the al-Fayed family and Icelandic investment group Baugur, which went bust in the 2008 financial crisis.

The company has undergone a costly £300m debt refinancing, and posted a fifth straight year of statutory losses for 2015 despite double-digit online sales growth and increased revenue.