Sports Direct International (SDI), which acquired assets of House of Fraser in bankruptcy proceedings for £90 million (€101.6m-$116.8m) in August, has abruptly sacked the directors and senior management of the British department store chain. The single-sentence statement issued by the British retailer refers to the collapse of the department store group and subsequent calls for an investigation into the circumstances of that demise.
The large-scale takeover could be regarded as part of Sports Direct's strategy to upgrade its retail business, but it is proving apparently more complicated than anticipated. It has been suggested that Mike Ashley, chief executive and majority shareholder at SDI, is supporting the idea of an investigation into the run-up to House of Fraser's administration, a British form of bankruptcy proceedings.
Talks intended to reduce store rent bills have reportedly saved 20 stores from closures, but negotiations with some of the landlords have been dragging on. House of Fraser suffered from issues with stock and customers complaining about refunds, and it had to cancel online orders due to a dispute with a distribution partner. Some customers complained in the last days that House of Fraser stores had become less appealing, with some half-empty shelves and offerings that were reminiscent of some of the stores operating under the Sports Direct banner. Drapers reported that the new owners intended to axe House of Fraser's exclusive brands.
SDI has bought 58 British department stores belonging to the chain, the House of Fraser brand and all of its inventories. But the pre-pack administration deal meant that SDI could walk away from some of the department store group's obligations. SDI did not provide any information on House of Fraser's management going forward. It was previously suggested that some of the department stores could be turned into Sports Direct or larger concepts with a mixture of sports and fashion banners owned by SDI, but again the company.
Meanwhile, in comments to City A.M., a Sports Direct spokesperson rejected as irresponsible and incorrect claims that it wanted to scupper the sale of Magasin du Nord by Debenhams. SDI owns just under 30 percent of this other ailing British department store chain and it has been speculated that SDI had discussed a potential merger between Debenhams and House of Fraser. The sale of Magasin du Nord, a Danish department store chain, is meant to reduce Debenhams' debt and to support the turnaround of the retailer, which has issued three profit warnings in the last year. SDI already denied its intentions to make a full bid for Debenhams, to clarify a comment from a director at the group's annual shareholders meeting.
Separately, Ashley made it clear that he was disgruntled about the events around that meeting on Sept. 12, when several advisory groups encouraged shareholders to vote against the re-election of Keith Hellawell as SDI's chairman and against Ashley's re-appointment as chief executive. Hellawell eventually stepped down just before the assembly, along with Simon Bentley, senior independent director. Ashley's re-election was opposed in the end by 9.78 percent of the votes.
SDI announced ahead of the meeting that Hellawell would be replaced by David Daly, one of its directors, and that Nicola Frampton would join the board from the start of October. She is managing director of the U.K. retail division at William Hill, and she previously focused on risk management and corporate governance as a consultant, most recently with Deloitte. Cally Price, a workers' representative, has been elected to join the board in May 2019.
Nine days later SDI added that Richard Bottomley has been appointed to join the board from the start of this month. Sports Direct said that Bottomley has experience of more than 25 years in working with listed companies during his time as a senior partner at KPMG, and he continues to be a member of the Audit Committee Institute. Bottomley has joined the board as senior independent director, a member and chairman of the audit committee, and a member of the nomination committee. SDI said Daly shall step down as member of the audit committee but remain a member of the remuneration and nomination committees.
