Debenhams mulls store closures
The group announced it is considering closing 10 of its 176 UK stores in the next five years, a central distribution warehouse and about 10 smaller warehouses. The group added it is also considering leaving some “non-core” international markets.
Debenhams stated they will give out further details in October about the store and warehouse closures.
The plans were announced as the UK department store giant posted a drop in its half-year profit pre-tax profits by 6.4 per cent to £87.8 million for the six months to March 4. UK earnings before interest, tax, debt and amortisation fell by six per cent.
Domestic operating profit fell by 11.3 per cent to £67.5 million. Its like-for-like sales, however, saw a 0.5 per cent increase year-on-year, which the company said is a reflection of the growth of its online business and non-clothing items.
Sergio Bucher, the group’s chief executive who joined the company last October, said its customers were changing the way they shopped and therefore Debenhams was also changing.
“We will be a destination for social shopping, with mobile the unifying platform for interacting with our customers,” Bucher said.
Debenhams also announces plans to step up investment in its instore cafes, restaurants and beauty services.
According to Kate Ormrod, lead retail analyst at GlobalData, continued underwhelming trading has resulted in the retailer’s new turnaround strategy, Debenhams Redesigned, aiming to boost destination appeal via experiential retail and a unique offer, and drive online growth.
“Given Debenhams’ online proficiency and investment in the channel, we do not think the potential closure of 10 UK stores goes far enough,” Ormrod said.
She added that while investment in revamping stores and improving the shopper experience will drive footfall, it is undesirable product which lies at the heart of its problems, especially in clothing – with Debenhams suffering from share erosion over the past five years.
“The plan to manage the Designers at Debenhams portfolio more robustly is long overdue given how extensive the range has become,” Ormrod said. “The axe needs to fall on many brands, with the prime targets being Floozie by Frost French and Star by Julien Macdonald. Given the success of Nine by Savannah Miller, there is still life in the concept, but refreshing its designers more regularly is a must, and Debenhams must take action more swiftly if ranges are not working and lost relevance.”
Beauty and gifting remain its star performers – with its Beauty Club scheme a key asset, but, according to Ormrod, Debenhams however needs to better leverage its thriving categories by driving cross-sector spending.
“Though worthy of investment, with no mention of homewares in the strategic update, it clearly remains an afterthought. CEO Bucher’s strategic plan gives Debenhams plenty to do over the next three years; and while focusing on experience and leisure will please existing shoppers, customer acquisition will remain a challenge given the impressive competition.”
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