Mike Ashley is a retail predator. Much like a lion watching his prey out on the savannah, he waits until the wildebeest looks weak and separated from the herd and then bides his time. Pouncing only when it suits him and he’s certain of a tasty and easy meal.
This week he pounced and was rewarded with House of Fraser for £90m. He already had a 11% stake in HOF, bought in 2014, so he had an interest.
Left - Harrods of the High-Street?
This price was drastically down from the £480m the Chinese owners, Sanpower, paid for it. The brand is weak and damaged, but not dead, but it will need investment in order to survive. They didn’t seem to have a strategy and they didn’t define why you would go to House of Fraser over another store.
Ashley needs to work on making it clear why you’d return to House of Fraser. While John Lewis is offers mostly necessity, and can be bought online, Ashley would be better at targeting ‘treats’, relating to fashion and dressing up to seduce a higher spending customer to leave the house.
This needs to be the store for birthdays, for Christmas, for anniversaries, or anything that requires fancy packaging and that feel good, swinging bag feeling. Fewer visits, but more money out of people’s pockets. At the moment the nicest thing they sell is a Mulberry handbag, but they need more excitement to keep people interested.
Promising to turn the struggling chain into “the Harrods of the high street”, could be Ashley’s flippant words, but if he focuses on that idea, he could be onto something. You don’t go to Harrods for the mundane or ordinary. Admittedly, the prices will have to be different, but you can still package everything nicely and tie-in exclusive product and brands.
Reading about his ‘elevation’ and expansion plans for his other brands, recently, what’s left of House of Fraser will be in prime locations such as Bluewater, Westfield White City and Glasgow, if he decides to stick to closing the other 31 struggling stores, and would fit nicely into this expansion plan. He could easily use his premium Flannels brands to insert much higher end product, something House of Fraser always aspired to be, but never quite got there.
He’s realised that it’s important to have product and brands for each level of customer. The bargain end is fickle and requires huge volumes, while the growth in luxury brands offers lower volumes, but much higher profits. Flannels is expanding rapidly and this acquisition will help create a larger scale.
Flannels is opening new stores at Glasgow Fort shopping centre, Hull and Leicester as part of its ongoing expansion drive. The retailer announced, recently, it expects to open between 6 and 12 new Flannels stores before its financial year end next April 2019. In its premium lifestyle division, Sports Direct currently operates 21 Flannels stores, 10 Cruise stores and three Van Mildert stores, so its premium designer business is really growing. Even Oxford Street is getting a Flannels next year.
He could introduce his underwear brand, Agent Provocateur, into HOF stores and work on their strong existing brands like Biba.
It’s inevitable, if Debenhams continues to struggle, that he’ll merge the two, already owning 29.7% of Debenhams. He’s probably waiting for his moment to strike on this one too and get it at a knocked down price. The high street will plateau soon and even go back into a growth mode and, if in the right locations, in the right cities, House of Fraser will be smaller, but much stronger.