The department store chain Fenwick, which closed its historic shop on London’s Bond Street in February, has reported its seventh year of losses as sales fell.

The family-owned group, which is left with eight department stores led by Newcastle, said sales fell 3% to £299m in the year to January and it almost halved losses to £38m.

Owners of preference shares in the business were paid a £3m dividend despite the ongoing losses, roughly in line with the prior year.

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“Trading was challenging”, directors said in accounts filed at Companies House this week. They said Fenwick faces “significant and growing competition from online retailers” while consumer confidence and spending had been hit by a “volatile environment” caused by higher energy and commodity costs and rising interest rates.

Fenwick and other department stores including Selfridges and House of Fraser are struggling to cope with the rise of online shopping, which allows consumers to research and buy branded goods from home. The rise of luxury specialists such as Farfetch and Net-a-Porter has combined with a squeeze on spare cash for aspirational shoppers from rising interest rates and energy bills.

Fenwick, which was founded in Newcastle upon Tyne in 1882 by John James Fenwick, announced in 2022 it was closing its Bond Street store to invest in its other stores, much to the dismay of regular customers who spoke to the Guardian before the shop closed its doors in February this year.

The retailer said: “Fenwick is off to a great start for its next evolution having unveiled a new Beauty Hall on 10 October in its flagship Newcastle store following a £40m million installation investment, opening new restaurants such as Fuego and Mason & Rye, and streamlining operations behind the scenes in its Killingworth warehouse.”

The update on Fenwick’s financial performance comes as the retailer is back on the search for its third chief executive since 2018.

Longstanding former Harrods executive Nigel Blow was poised to become boss of Fenwick this month but has not taken up the role amid controversy about the alleged behaviour of the late owner of the Knightsbridge department store.

Blow worked at Harrods for more than 14 years from 1992 to 2007 when the retailer was owned by Mohamed Al Fayed. Al Fayed was the subject of a recent BBC documentary based on the accounts of more than 20 women who said he had sexually assaulted them.

Blow has said he had no knowledge of Al Fayed’s abuse of the women during his time at Harrods.

He was to replace John Edgar, a former Selfridges and Harrods executive, who served for nearly five years after taking over from former Argos executive Robbie Feather, the group’s first non-family boss who was in the role for less than two years.