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Debenhams CEO Bucher admits product fail as profits dive

Debenhams chief executive Sergio Bucher has admitted the retailer’s clothing offer was “wasn’t good enough” in its first half, resulting in a drop in sales and profits.

Profit before tax nosedived 84.6% year on year in the 26 weeks to 3 March, to £13.5m. Sales also dipped as group gross transaction value fell 1.6% to £1.7bn, while like-for-like sales fell 2.2%.

Bucher said although the market was “very volatile” the business takes responsibility for the lacklustre performance: “Our product hasn’t been exciting enough. We were too much on the back foot with our product.

“We need to be more dynamic. We will be exiting some brands, shrinking others and bringing in others. We need fewer products. We need the design to be sharper and we need to own the brands that we have.”

Bucher said the business was not seeking to become more premium in its fashion offer – a silk dress from Studio by Preen’s new Designers at Debenhams collection is £200 – but the shopping experience would be more elevated going forward.

“We’re not trying to be more premium, but to have a more premium presentation. It needs to be great value for money, but that doesn’t mean cheap. We need to encourage our current shoppers to shop with us more often.”

New managing director for fashion and home Stephen Cooke said the business was studying its customer to improve its fashion offer: “The way we attack our key categories is important. We’re studying our prices, customer, what they are buying – and what they aren’t – to see how we can maximise the opportunity. There is room to grow our market share.

“The womenswear market is lethargic and there is a lot of mediocrity out there. We need to not be mediocre – we need to rise above it. we need to focus on the best product at the best price point.”

The business said an increase in competitor discounting over Christmas, led to higher clearance from the retailer of seasonal stock and a group gross margin decline of 160 bps.

Digital sales were up 9.7%, however, driven by strong growth in mobile and improved conversion rates.

Bucher said the pace of change in retail had accelerated and the business must step up its rate of change as a result.

Debenhams is focusing on five priority actions to mitigate the fast-changing market conditions and drive progress in the full year. These are: delivering above-market digital sales growth driven by technological change focused on mobile; sustaining leadership in beauty through innovative customer engagement both in store and online; revitalising fashion product under new leadership, as part of which the Designers at Debenhams refresh is under way; changing in-store experience for customers through a redesigned service model and store presentation; and accelerating cost-reduction activity to underpin additional annualised savings of £20m identified in January 2018.

Debenhams said it has seen “encouraging results” from new store format trials, which include a slimmed-down footprint and restaurant concessions. It plans to roll this out to 35% of its UK store sales base.

Two stores closed in January and a further eight have been earmarked for potential closure should they become loss making. In addition, 25 shops are up for rent renegotiations with landlords and 30 stores may downsize.

The retailer also plans to grow its beauty business, creating an integrated digital environment. A new beauty hall concept will launch in the autumn featuring an interactive digital technology, improved customer service and more brands.

Despite the challenging market, Bucher is confident the retailer can return to growth in 2019: “I think that we have always been clear that 2018 is a transition year. But I’m excited by the signs of progress we are seeing. The five action points that we have really focused on are actions that we’ll scale within the next 12 months, so it is our intention to see a progression in our performance during the year to 2019.”

Readers' comments (8)

  • It’s not too difficult. Invite them and they will come. Kick out those awful traders (labels) on young fashion. Look deeply at them, some of them have no design departments and have no idea how to trade, back in the day they were given space and somehow expanded into 100 stores!? All driven on turnover with no consideration for Debenhams as a ‘brand’, all self inflicted, almost like a bad tenant (it’s ok, they aren’t great but they pay the rent). The end customer saw this a long time ago, they did tell you but you didn’t want to hear. It’s easy to resolve but it’s such a big ship. Hope they can see what we see.......

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  • OK so the strategy seems to be to turn Debenhams into House of Fraser.....have they been watching what has been happening at HoF??? HoF now doing a CVA, how long until Debenhams does too? Unfair if HoF is allowed to bully landlords into rent reductions. These stores will survive though as need exists for smaller retail brands to use concessions as a model as high street stores are punishingly expensive

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  • OMG!!! How long does it take to realise this, people on this forum have been saying this for years, totally agree with the first comments on here. Get some credible new up and coming brands in and stop trying to rip off the customer by buying cheap tat from Bangladesh to enable you to mark down, sell less, better quality and better margin, as we all know the guts were ripped out of any value this business had by private equity who sped out of the Debs car park years ago in their Ferrari's, it's struggled to recover from this ever since and a changing climate has exasperated this. Shrink it back, give customers an environment that feels special, Prosseco/Gin Bar, in store Street Food Trucks not crappy cheap breakfasts, Makeover Girls, in store fashion shows, engage a young dynamic marketing company, the list is endless but Retail really needs to up its game massively, the competition isn't exactly vast , HoF , JL , gone are BHS, C&A etc soon JL will be the only department stores left, yes it also has to compete with on line but it also has an on line offer so again make it seam less with quick delivery's. When ever Deb is mentioned on these pages it always attracts lots of comment because everyone can see it plain as day . Biggest issue they face is having the dynamic talent that the above will take, when Managers and Directors after all these years still think the route is long discount terms , long lead times and high margin then it appears the writing is on the wall, blame the weather, blame rent rates, blame online, blame the economy, blame a bad buying season (how many times do we hear this) but Department Stores they have never had less competition, no better time to shine and stand out and reinvent the retail experience, old formula's need binning and so does anyone who cannot stand up and be counted.

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  • Love how a new CEO blames Product. Anything to deflect the strategy failings?

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  • Both Debenhams and HOF woes are totally self-inflicted. Neither of them can blame anyone else. Some of us have been saying for years that their trading concept is dated, with both store groups needing to drastically downsize their physical presence both in size and numbers, but the status quo of mediocrity suits all except the balance sheet.

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  • It's easy to blame everything else. Stop discounting every 10 minutes-who would pay full Debenhams prices-just wait for next week's reductions.

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  • It seems as if every piece you pick up in Debenhams has been made in Bangladesh!!. There are obviously margin points advantages to be gained but the product looks very poor. Why would you shop there???

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  • Isn't Debenhams a British department store?

    British Manufacturing......?

    Stop the over consumption and stocking on fast fashion trend pieces, that will eventually go to land fill and nurture British quality made products. Teach consumers to spend on items made to last, isn't that what Debenhams is about.

    Make to order could be a great opportunity for Debenhams giving consumers personality and a unique product to market.
    Saving money, space of inventory and bringing something different to the retail environment.

    Where's my job offer in head office ?

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