What the Dickins is going on here?: Heather Connon finds out what's in store at House of Fraser as it tries to woo the City (CORRECTED)

CORRECTION (PUBLISHED 8 FEBRUARY 1994) APPENDED TO THIS ARTICLE

WHEN is a department store not a department store? When it is a 'collection of speciality businesses under one roof'. That may sound the same thing to you, but to Andrew Jennings, managing director of House of Fraser (Stores), the distinction is the key to the group's prosperity.

'Department stores traditionally had a wide assortment, where you could buy almost everything,' he says. 'But the retail world is becoming a place of specialist businesses.'

He will soon be preaching the gospel to the City. Nine years after it was taken private, following the controversial takeover by the Egyptian Fayed brothers, it is poised to return to the stock market. Tomorrow the group is likely to announce that the pathfinder will be issued on 28 February, with the application lists opening about three weeks after that and first dealings in the shares after Easter.

Selling a department store group may not be that easy. The group's share of the retail market has fallen from 4.6 per cent in 1986 to 4.3 per cent in 1993. And its reputation for being expensive will count against it in the price-conscious 1990s.

House of Fraser has suffered more than most. Once considered upmarket, now it is just seen as expensive and old-fashioned. As other retailers woke up to the need to tailor merchandise to specific consumers, House of Fraser suffered by trying to be all things to all men.

Its record through the 1980s was patchy, with operating profits fluctuating between pounds 20m and pounds 45m over the past six years. And sales per square foot are about pounds 140, a third of that at John Lewis and Selfridges and pounds 60 below Debenhams.

'The problem is it is a very grey department store group,' says Julie Ramshaw of Morgan Stanley. 'The consumer's perception is that it is dull and staid.'

Mr Jennings hopes to change all that. His recent review of the business concluded that fashion is its strength, whether clothes, accessories, china or glass. Ladies fashion already accounts for more than a quarter of sales, and that figure is likely to grow.

Mr Jennings has abandoned departments such as haberdashery, fabrics and knitting. These were making only a small contribution to sales and were taking up space and detracting from the fashion focus. He also realised that, with stores ranging from 13,000 square feet to 330,000 square feet, it was ridiculous to try to offer the same range of products in every store.

That led to a thorough analysis of the group's stores and strategy and to the decision to split the stores into three sizes to determine the range of products. Only the 17 stores with more than 120,000 square feet will offer the full product range. Those between 30,000 and 120,000 square feet will concentrate on fewer departments, while the 14 smallest stores will concentrate on just a few departments.

Analysis of the local community forms the second leg of the strategy. The group knows it is most attractive to shoppers aged over 35 and from the higher socio-economic groups. The numbers of both will increase over the next decade, which means the outlook for department stores is brighter. But getting the offer right will be crucial.

Thus, the group has designated certain shops as 'AA' stores. These will be fashion-led, offering a range of up-market contemporary labels. Moving downwards, 'A' and 'B'- grade stores will have more classic styles, while the 'C' stores will offer just a basic range.

The programme of refurbishment, which is likely to cost pounds 80m, will take three years. Some 18 stores will get attention this year.

The group has been criticised for under-investment, spurred by rumours that the Fayed brothers were financially stretched and were milking the group to service their debts.

House of Fraser refutes this. Brian McGowan, the former Williams Holdings chief executive who was appointed chairman in preparation for the float, says that more than pounds 100m has been invested in the group over the past six years, similar to the depreciation charge. And more than half of the 56 stores are freehold. Had the Fayeds wanted to milk the group, these would surely have been sold and leased back.

There may have been investment, but the money was not necessarily wisely spent. Frasers is a classic example. The three-year, pounds 8.5m refurbishment programme created a dream store, with state-of-the-art fittings and sensitive restoration of the features of the Grade II listed building. But was it necessary to spend so much? What was the point, for example, of installing marble which will last 20 years if the store needs another refurbishment in just eight?

But the group is learning. The refurbishment of Howells in Cardiff - probably the only department store to have a Wesleyan chapel in its centre - was expected to cost pounds 6.5m, but that was cut to pounds 2.5m.

One of the first stores to be refurbished will be Dickins & Jones, which the group intends to make its flagship, replacing Harrods. It is already almost exclusively a fashion store but, given the proximity of other department stores, there is little point in introducing the full range of merchandise.

Instead, the refurbishment will focus on fashion and will, the group hopes, restore it to its former glory. Some of the worst changes made in the 1980s such as the central bank of lifts will be removed, allowing customers to see through the whole store and giving it a feeling of space.

'We will try to get people involved in merchandise worlds as part of the shopping experience,' says Philip Wright, development executive. Thus there will be separate sections for ranges such as eveningwear. And the Rose Room on the top floor - formerly the restaurant and scene of elegant tea dances - will become the place to shop for lingerie.

The outside will be returned to its original 1920s look. Down will come the tiled facade advertising the store's names, put up during the 1970s, and the original windows - many of which still lurk behind the facade - will be restored.

After the flotation, House of Fraser will be the only pure department store on the stock market. Analysts are enthusiastic about its prospects. Many specialist retailers, which took so much of department stores' business in the 1980s, are finding life tough in the 1990s, and department stores are gradually coming back into their own. House of Fraser's lacklustre record means it has room for recovery. If Mr Jennings can persuade the City that he will reverse the poor performance of the group, the pounds 500m price-tag it hopes for may not look so ambitious.

CORRECTION

The market share of the department store sector has fallen from 4.6 per cent in 1986 to 4.3 per cent in 1993, not that of House of Fraser as stated in yesterday's edition.

(Photographs omitted)