After months of turnaround turmoil, Debenhams has taken some positive steps in the right direction.
The warm reception for its new own-brand womenswear collection, Kley, on Wednesday last week was swiftly followed by the successful quashing of a legal challenge funded by Sports Direct to its company voluntary arrangement a day later.
However, now faced with executing an arduous store-closure programme and still plagued with issues of discounting, dated product and credit insurance issues, can the struggling department store chain turn itself around?
On Thursday a challenge against Debenhams’ CVA proposal was rejected in the High Court, paving the way for 22 store closures. The CVA was originally approved by creditors in May when a majority “significantly above” the required threshold of 75% voted in favour of each proposal.
Around 100 stores should close, given many of the locations Debenhams currently trades in are peripheral retail centres
Jonathan De Mello, director, Harper Dennis Hobbs
The closures are expected by January 2020. A further 105 stores will be subject to lease negotiations and rent reductions. Nevertheless, industry experts feel this does not go far enough.
“Around 100 stores should close, given many of the locations Debenhams currently trades in are peripheral retail centres,” says Jonathan De Mello, head of retail consultancy at property services company Harper Dennis Hobbs. “[It should] focus only on major city and town centres that can sustain a large department store.”
He adds: “As a department store, it is firmly stuck in the middle with no discernible strategy or target customer. More drastic action is therefore needed if it is to survive at all, particularly given that 70% of retailers that enter into a CVA, administration or other form of [insolvency] process go on to fail completely a few years later.”
One restructuring expert agrees that speed is of the essence for Debenhams to avoid brand damage: “It needs to close the stores now and at speed to avoid death by 1,000 cuts and brand damage, so as not to be seen to be doing a store closure [programme] for too long.
We’re [already] selling the more expensive items, and that’s showing that the customer will spend if it’s right
Steven Cook, Debenhams
“It can cause insecurity with people in the business and create question marks with suppliers and consumers. Debenhams needs a statement of who it is and it has got to fill in the gaps with its own-brands for what its third-party brands don’t offer,” he adds.
Unlocking the Kley
Enter Kley, Debenhams’ new own-brand womenswear label, that launched online and in 70 stores last week. Despite Debenhams’ overly contrived description, outlining the collection as “LIFE pieces” – luxury, important, function and essential – Kley is a refreshing offer. The well-thought-through contemporary collection has a more premium feel than its existing brands, such as J by Jasper Conran and Principles.
With 125 styles, the range is large and covers all categories – from jersey tops and on-trend midi-dresses to ankle boots and leather accessories – in a palette of khakis, dark dusky pinks and creams.
Prices range from £20 to £220, and styles are available in multiple fabrics options, depending on the customer’s budget. Leather items come with PU alternatives, and customers looking for cheaper options to the silk shirts can find blended versions.
Outerwear is a standout for the autumn range, and includes a long-line cream shearling coat at £150, a practical yet stylish khaki parka at £110 and classic leather options at £220.
The brand is focused on style rather than traditional demographic metrics – a defined step away from what we have come to expect from Debenhams.
“This isn’t about price or age. It truly is a style customer,” Debenhams managing director of home and fashion, Steven Cook, tells Drapers. “This is the customer that is shopping in more of our premium brand base, who we can see hasn’t been cross-shopping. We’re [already] selling the more expensive items, and that’s showing that the customer will spend if it’s right.”
This new brand is stylistically very nice and fashion forward, but it looks under-priced for what it is
The breadth of the offer will distinguish Kley from the “mediocrity” present in the market, Cook believes: “It’s all-encompassing from A to Z, and covers all categories of product.
“While we can’t compare ourselves with the marketplace, this covers a range of product that we weren’t covering: something relaxed and stylised, but comfortable and wearable.”
The collection was met with an almost universally positive response by the national press, and was praised for its easy elegance and good value. Nevertheless, some of Debenhams’ suppliers believe its price points are too low.
“This new brand is stylistically very nice and fashion-forward, but it looks under-priced for what it is,” says one supplier. “It should have [been] positioned at a slightly higher echelon.”
There are benefits to own brands and there are benefits to international brands, and we have opportunities in both
Steven Cook, Debenhams
Another warns that in revamping its own-brand offering, Debenhams should be careful not to duplicate its third-party brands and damage relationships: “If this new range is simply a copy of the brands, then why should [they support] Debenhams. Brands act very much as an attraction to enter a store, and to try to challenge them is not the way to move Debenhams forward.”
Chloe Collins, retail analyst at Global Data, agrees: ”Although Kley will inject some fashionability into Debenhams’ ranges and help it appeal to a broader audience, to truly turn its fate around, Debenhams must focus on refreshing its Designers at Debenhams ranges, which are now outdated and lack appeal.
“It must also expand its third-party offer and partner with more desirable brands to rival the likes of Next and Very.”
Cook has a more holistic outlook: “There are benefits to own brands and there are benefits to international brands, and we have opportunities in both. If it’s the right brand that fills a void, I don’t really care about the business model.”
He would not reveal a forecast for the split between own brand and third party, saying the market is evolving and so is Debenhams’ response to it.
Despite a positive press about the collection, Debenhams’ legal victory just a day later came as a timely reminder of the numerous pressures still facing the business.
“It’s positive that Debenhams is doing something to turn around sales, but shouldn’t it be focusing on trying to remedy more fundamental issues, rather than launching a womenswear brand in an incredibly saturated market?” asks retail analyst Richard Lim.
It’s positive that Debenhams is doing something to turn around sales, but shouldn’t it be focusing on trying to remedy more fundamental issues?
Richard Lim, retail analyst
“The in-store and online environment still lags massively behind competitors. Isn’t it more important to get those right?”
Another issue facing the department store chain is its constant discounting. However, Cook says this is being cut back to focus on “hard-hitting moments of promotion versus [a] constant state of promotion”.
“Trade is interesting, but our early indicators in what we’re selling and how we’re forecasting are solid. We’ve set ourselves up for a challenging market so we’re selling [full] price.”
Yes, last week was one of positive respite for Debenhams, but it is not out of the woods yet, says analyst Mark Pilkington: “However promising though these two developments seem in the short-to-medium term, the whole mid-market department store channel is on the retreat globally, so in the long term, the future still looks cloudy for businesses such as Debenhams.”
The Drapers Verdict
Kley is an overdue and welcome addition to Debenhams’ fashion offering, with a contemporary tone comparable to its more premium competitors including Cos and Whistles.
However, to compete in an already-saturated market, the retailer must focus on visual merchandising and marketing to tempt shoppers to spend.
The executive team needs to tackle the wider issues at hand. Now free from CVA challenges, the department store must act quickly to exit stores and inject life into its remaining portfolio to ensure customers remain engaged.
Debenhams has shown its first signs of reigniting relevance, but the danger is that the potential success of Kley is lost amid existing tired brands and stores. It must use this positive momentum to drive forward its turnaround plan and transform a positive week into a positive year.