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  1. ITV Report

Sports Direct launches negotiations with House of Fraser landlords

House of Fraser has been stung by soaring costs and falling consumer spending power (Aaron Chown/PA) Photo: PA Wire/PA Images

Sports Direct is now in talks with House of Fraser landlords in a move that could hasten potential store closures if agreements on rents and leases fail to be reached.

Commercial real estate services firm CBRE confirmed on Monday that it had been appointed to advise Sports Direct “on all property related matters in relation to its recent acquisition of House of Fraser”.

Some landlords have already been in touch with CBRE, which said “contact will be made to all landlords over the following days”.

Talks will centre around rental costs and the length of leases, though local councils will also be part of negotiations in some cases given the impact of business rates on the retailer.

Like many high street peers, House of Fraser has been stung by soaring costs and falling consumer spending power.

The company saw its business rates bills rise £3.99 million to £30.24 million this year following a Government revaluation, according to research group Altus.

Prior to the latest crisis, House of Fraser had recently agreed a so-called Company Voluntary Arrangement (CVA) with landlords to close half of stores, with 6,000 jobs in the firing line.

Sports Direct founder and chief executive Mike Ashley said last week that the retailer will “do our best to keep as many stores open as possible” after it launched a £90 million rescue of House of Fraser.

Sports Direct founder Mike Ashley Credit: Joe Giddens/PA

But doubt still remains over the long-term future of jobs and whether Mr Ashley will shut underperforming stores as part of a restructuring programme.

Mr Ashley’s deal was struck Iast week through a pre-pack administration process, where a company is put into administration before a new buyer cherry-picks the best assets.

It came after C.banner, the Chinese owner of Hamleys, pulled plans to buy a 51% stake in House of Fraser and plough £70 million into the ailing retailer.

Mr Ashley beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill, whose proposal was understood to be in excess of £100 million.

While it would have avoided an administration and included House of Fraser’s pension scheme, accountancy giant and appointed administrators EY opted for Mr Ashley’s offer.

Sources have said that Mr Ashley will now begin the process of turning some House of Fraser stores into Sports Direct outlets and rebrand others under the Flannels fascia.

Prior to its collapse, Mr Ashley had held an 11% stake in the department store chain.

The deal will see the tycoon tighten his grip over the British high street, adding to his sports retailing and “premium fashion” empire that has seen him build up stakes in rivals such as Debenhams, Goals Soccer Centres and French Connection.