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Fears for House of Fraser after bid to reduce rents

The retailer is seeking a reduction in some of its rents. Credit: AP

Fears are growing for the financial health of department store House of Fraser after the company wrote to its landlords in a bid to reduce rents.

A company spokeswoman said the company has written to its landlords asking for "their support" to reduce rents ahead of the publication of its Christmas trading performance.

But a source told the Guardian the chain was not planning to close any of its branches, but instead reduce the size of its stores by around a third over 10 years by getting rid of top floors or basements.

House of Fraser, which was bought by Chinese conglomerate Sanpower Group for £480 million in 2014, said in a statement: "We can confirm that we have contacted some of our landlords asking for their support as we drive forward with our transformation programme."

The firm's apparent financial troubles is an example of a retailer that has "failed to adapt" to industry changes, Retail Economics chief executive Richard Lim said.

The department store in Edinburgh. Credit: PA

"The unforgiving shift towards online spending against a backdrop of inflexible leases, upward only rent reviews and spiralling operating costs has put traditional retail business models under intense pressure," he said.

"Put simply, many retailers are operating with business models that are no longer fit for purpose in today's digitally-driven world."

In September, the retailer came under strain after the launch of a new web platform and "significant discounting" took its toll.

The company revealed half-year earnings sunk to an £8.6 million loss, down from a £900,000 profit in 2016, as website sales suffered from the roll-out of a £25 million online sales platform.

Gross profits also slipped 5% to £196.9 million over the period, as the group slashed prices on old stock to pave the way for a new womenswear brand.

The news comes after competitor Debenhams issued a profit warning earlier in the week in a trading update.

The retailer said UK like-for-like sales dropped by 2.6% in the 17 weeks to December 30, with overall group sales down 1.8%.

The retailer made the warning after it slashed prices to boost flagging sales over the festive period amid "competitive and volatile" trading.

HOUSE OF FRASER: FROM GLASGOW SHOP TO HIGH STREET NAME

Today, House of Fraser has 59 locations across the UK and Ireland and employs 5,000 people and 12,500 concession staff.

But it began nearly 170 years ago with a single drapery shop opened in Glasgow by Hugh Fraser and James Arthur.

The store, which opened in 1849, grew steadily and became House of Fraser in 1941.

It took hold as a national chain after the Second World War.

Over the years, the business has acquired numerous companies, including Harrods, which is now owned privately.

House of Fraser has been owned by Egyptian-born billionaire Mohamed Al-Fayed and before that by the Fraser family, from which it takes its name.

It was bought by Chinese conglomerate Sanpower Group for £480 million in 2014.