House of Fraser to unload weak stores

House of Fraser is to sell several of its underperforming department stores in a restructure that could see the disposal of DH Evans, the well known Oxford Street store in London.

The announcement came yesterday as the company announced a dramatic 50 per cent slump in profits to pounds 14m due to continuing stock problems and weak sales.

Brian McGowan, the chairman who last week appointed the former Texas Homecare chief John Coleman as the group's new chief executive, also admitted for the first time that he had vigorously pursued the high-profile American David Dworkin for the top job but eventually decided to appoint Mr Coleman instead.

"I like Dworkin very much. He talks a lot of sense, he's a good retailer and I think I could have worked with him. I also think we could have agreed a remuneration package that would have been acceptable to the City."

However, Mr McGowan said he had chosen Mr Coleman, "because I thought he was the better man for the job." He added: "I realise I will have to live or die by my choice."

He dismissed comments by some in the City that not appointing Mr Dworkin, the former chief executive of Storehouse, was "the worst mistake" of his career. "That's absolute rubbish," Mr McGowan said.

The House of Fraser chairman met Mr Dworkin in London and at Mr McGowan's home in Colorado. Mr McGowan maintains he was turned down by no one, although there is a feeling in the City that the American ruled himself out before the job was offered. It is thought that Mr Dworkin would only accept the position if the company declared further provisions to cover excess stock, which Mr McGowan was not prepared to countenance. "There is a credibility gap here," one analyst said.

Mr Coleman joins at the end of the month when his priority will be to appoint two new merchandise directors.

House of Fraser, which operates 51 department stores including Dickins & Jones and Army & Navy, is still labouring under poor stock control and buying problems, which have forced the company into an almost permanent sale.

Around pounds 21m of old stock has been carried into this year. Gross margins has declined by 1.6 per cent. However, the company said like-for-like sales in recent weeks were 4.5 per cent higher.

Mr McGowan admitted that the group's sales per square foot average of pounds 173m was still lamentable, with the worst stores achieving lees than pounds 100. The target is pounds 200 per square foot and the laggards will be closed. DH Evans is a candidate as it is surrounded by more successful rivals such as Selfridges and John Lewis.

In the year to January profits of pounds 14.3m were struck on flat sales of pounds 749m. The dividend was maintained at 5.5p. The shares rose 2p yesterday to 174p.

Elsewhere on the high street, the fashion retailer French Connection is also struggling. Its profits halved from pounds 7m to pounds 3.4m last year due to trading problems in the US and Europe, though trading has improved since the year end.