Shake-up fails to halt profits slide at Jenners
Pre-tax profits at the department store will be "no lower than 1m" this year, compared with an estimated 1.5m prior to the takeover.
House of Fraser (HoF) says the integration of Jenners is complete, but the immediate cost savings weren't enough to prevent half-year losses of 4.4 million across its 52 stores in "extremely difficult" trading conditions.
Analysts said department stores were among the worst hit by the current slowdown in retail spending, with cookware and soft furnishings among the poorest performing sections of the high street.
HoF has already made 115 staff redundant at Jenners since it bought the family-owned Princes Street institution in March, including all the senior fashion buyers and a long-serving manager of the ground-floor cosmetics department.
Other savings were made through the removal of duplicated back-office functions such as computer systems and the enhanced purchasing power of bulk-order stock buying.
Although the Jenners deal was worth 46 million, HoF arranged the sale of the flagship Princes Street store to an unnamed third-party property investor so that only 14.1m was actually paid.
Prior to the purchase, Jenners - which also includes two small airport gift outlets and a shop on Loch Lomondside - was on course to make annual profits of about 1.5m. Although yesterday's figures are lower, they pave the way for much better future profits.
HoF also announced yesterday it would introduce more of its own-label brands into Jenners, but repeated its earlier promise not to tamper with the historic brand, which was established in 1838.
The trading statement said: "The final stages of the integration include a selected introduction of HoF Group's private label and own-bought ranges in Spring 2006 and the alignment of further supplier terms.
"Whilst there is a high brand overlap with the core business, there are opportunities to enhance the product offer in Jenners and to bring other new departments such as toys to the rest of HoF group. Other earnings-enhancing opportunities identified include consolidation of certain head office functions (including buying functions).
"Management are pleased that the reorganisation and integration is now largely complete. HoF Group expects Jenners to deliver a profit before tax and exceptional items of not less than 1 million in the current year. With the reorganisation and integration work now largely complete, the Group expects that the future annualised pre-tax synergies should not be less than 3 million."
Shoppers outside the flagship store in Princes Street yesterday seemed unmoved by the changes. Anne Dixon, 54, said: "I haven't been to Jenners for some time but it is just the same as always. It's just an institution really, where you can browse and occasionally treat yourself."
Leigh Smith, 24, said: "I wouldn't ever come to shop here for clothes - it's far too old. I come in for make-up and fake tan, but that's it. They don't seem to be aiming stock at people my age."
Joanna Hollinger, 55, added: "I think it is just the same as ever and that's fine by me. It's expensive and I would never buy clothes here, but I like to have a look round at furnishings and so on. The staff are also nice."
The cost savings at Jenners were not enough to prevent an overall group slide in like-for-like sales at HoF of 4.3 per cent on a year earlier. Underlying losses for the half-year period - the company's quietest, as it does not include Christmas trading - compare with 2.9 million a year earlier. Profits of 28.2 million were achieved across the last financial year.
Chief executive John Coleman said HoF made progress in the period, following another acquisition - that of Beatties for 69.4 million in August. It has also launched new stores in Dublin, Maidstone and Norwich, accompanied by plans for the closure of Dickins & Jones and Barkers in London.