The sale of a struggling British retailer has turned into a standoff at the warehouse door.
House of Fraser, an iconic British department store chain sold to Sports Direct International SPD -1.06% PLC earlier this month after entering a U.K. equivalent of bankruptcy protection, shuttered its website, canceled consumer orders and said it would refund all online purchases that had not been sent after logistics provider XPO Logistics Inc. XPO -0.68% locked up the two U.K. warehouses it runs for the retailer.
The British division of Greenwich, Conn.-based XPO stopped processing orders at the distribution centers on Aug. 10, the day the 169-year-old retailer entered administration and was sold for $114.9 million, or 90 million pounds. The company, one of many creditors owed money by the retailer, has not allowed deliveries in or out of both warehouses, according to a person familiar with the matter.
“The sense is that XPO are holding the company for ransom,” the person said. “It’s very much a standoff at the moment.”
XPO is working to understand who owns the inventory of goods in the distribution centers, according to a separate person with knowledge of the situation. The company is seeking to put a new agreement in place with Sports Direct and recommence services, that person said.
On Friday, the retailer’s online site said the storefront was “working hard to make some improvements to the website. Don’t worry, we will be back up and running as soon as possible.”
XPO is in a long line of companies that say they are owed millions by the retailer. According to a document provided Friday by Ernst & Young, the accounting firm appointed administrator for House of Fraser, XPO is owed nearly $39 million. Luxury apparel brands including Ralph Lauren’s Polo UK Ltd., J. Barbour and Sons Ltd. and Giorgio Armani SPA are also owed millions, the Ernst & Young document said.
XPO is seeking to recoup about $15.3 million from Sports Direct for services it provided before House of Fraser entered administration, said the person with knowledge of the logistics company’s situation.
The dispute highlights the battles over large amounts of inventory that may be in legal limbo when a company becomes insolvent as creditors seek leverage to recoup some portion of what they are owed.
Typically contracts between retailers and logistics companies dictate what happens in the case of new ownership, with inventory on hand becoming the property of the new owner, said Evan Armstrong, president of logistics-consulting firm Armstrong & Associates.
“We usually recommend that there is a succession clause, and if either party goes bankrupt the contract is null and void,” Mr. Armstrong said. That can lead to disputes over what to do with the stock on hand, for example, and whether the warehouse operator can start liquidating inventory to pay some bills, he said.
“It can cause a lot of problems,” Mr. Armstrong said, especially ”when you have orders in the pipeline that can’t get fulfilled because of bankruptcy.”
House of Fraser’s quick sale after entering administration complicates the task of reconciling the company’s bills and its inventory. The Sports Direct deal gave the firm ownership of House of Fraser’s stock, including inventory stored in its warehouses, an Ernst & Young spokesman said, but those facilities also hold goods belonging to merchants that sell through House of Fraser.
Write to Jennifer Smith at jennifer.smith@wsj.com