Fenwick has kicked off a strategic review to ensure it “prospers” in the face of future challenges, after reporting a fall in full-year turnover and profits.
The family-owned department store chain’s turnover slipped by 1.4% year on year to £297.8m in the 52 weeks ended 27 January 2017, documents filed at Companies House show.
Pre-tax profit including property revaluation and pension liability adjustments fell 31.2% to £30.4m. Its gross profit margin was down 0.7%.
It said investments in its operational capabilities – including IT systems and digital infrastructure – together with discounting in stores were the main reasons for its fall in profitability.
Former Co-op chief executive Richard Pennycook, who joined Fenwick as non-executive chairman earlier this year, has been tasked with undertaking a strategic review of the business, “to ensure it is best-placed to prosper in the long term”.
The business has already re-evaluated its store portfolio, closing closing its branch in Leicester and outlining plans to shut the one in Windsor. It opened a new 800,000 sq ft store in Bracknell in September.
“Fenwick faces some of the most volatile and challenging market conditions seen in its 134-year history,” the board said.
It noted that, while the UK economy grew steadily in 2016, trading conditions in the retail sector “continued to be challenging in the face of strong structural headwinds”.
“New digital distribution channels and devices are giving consumers more choice than ever,” the board stated.
“At the same time, the excess capacity of many retailers is resulting in frequent discounting and price deflation, putting profit margins under increased pressure.
“Consumers are also spending more of their disposable income on services and leisure activities, as part of a behavioural shift from product consumption to experience consumption, requiring retailers to invest in the overall shopping experience to retain and attract customers.”
It added that it viewed the outlook for 2017 “with caution” given the continuation of these trends, “but also reflecting the likelihood that inflationary pressures caused by a weak currency will dampen consumer confidence and spending”.
“While the group will continue to strive for every pound of sales, the board will exercise tight cost control and seek to ensure that the business remains cash generative across the year,” it added.
The Fenwick family received a special dividend of £19.1m in 2016, which was paid using profits accumulated over time.