(Bloomberg)—The Chinese owner of House of Fraser plans to sell its majority stake in the troubled British department-store chain, adding to the upheaval on the U.K.’s shopping streets.
House of Fraser, No. 69 in the Internet Retailer 2017 Europe 500, reported a 2.9% drop in sales over the holiday shopping season and has entered negotiations with landlords to reduce rents on some of its 59 U.K. stores. In the year ended January 2017, the company reported net income of 26.8 million pounds ($37.1 million).
The U.K.’s department stores have struggled amid the rise of online shopping and a surge in sourcing costs driven by the pound’s 7% fall against the dollar and 14% decline against the euro since the Brexit vote. Sports Direct International Plc CEO Mike Ashley this month increased his holding in Debenhams Plc, spurring speculation he may acquire the House of Fraser rival. Ashley also owns a minority stake in House of Fraser.
Nanjing Xinjiekou Department Store Co. will sell its 51% holding to a tourism development company named Wuji Wenhua, according to a Chinese stock exchange filing Tuesday. The planned sale follows the collapse of Toys ‘R’ Us U.K. (No. 204) and electronics retailer Maplin Electronics Ltd. (No. 207) in February.
Sanpower Group owns a 27.32% stake in Nanjing Xinjiekou, according to Bloomberg data. Sanpower acquired House of Fraser in 2014 in a deal that valued the chain at 450 million pounds ($623 million).
Sanpower Group said after the acquisition that it planned to open 50 House of Frasers in China under the name “Oriental Fraser.” But as Chinese consumers started staying home to shop online, retailers have seen sales plunge.
The sale of the stake “will have no impact on the day-to-day operations or strategic development of the House of Fraser business in the U.K. and Ireland,” the store chain said in a statement. “It is business as usual.”
The company also has pivoted Nanjing Xinjiekou’s business toward health care. The conglomerate acquired China Cord Blood Corp. in 2015 for $1.4 billion and Dendreon Pharmaceuticals last year for about $820 million in cash.