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Debenhams profits tumble as it implements new strategy

Profits have fallen steeply at Debenhams for the 52 weeks to 2 September, despite a 2.1% rise in group like-for-like sales.

Its pre-tax profit fell 44% to £59m. This included £36.2m of exceptional charges related to closing 10 regional warehouses, pulling out of four international franchises and the wider costs related to its new strategy, “Debenhams Redesigned”. 

Underlying profit before tax dropped by 16.6% to £95.2m.

However, its gross transaction value edged up by 2% to £2.95bn.

Clothing sales slipped by 0.5%, which Debenhams blamed on the “weak market”. It said this was mitigated by a growth in beauty and food.

The retailer confirmed it will close two stores early next year, in Eltham and Farnborough. It is also planning to close its distribution centre in Northampton. 

Chief executive Sergio Bucher, who joined Debenhams from Amazon Fashion last October, unveiled his new strategy for the business, “Debenhams Redesigned”, in April. It focuses on experiential shopping, digital growth and driving efficiency.

Bucher said on the latest results: “We are making good progress with implementing our new strategy and are encouraged by the results from our initial trials, as well as the number of exciting new partners who want to work with us.

“The environment remains uncertain and we face tough comparatives over the key Christmas weeks. However, we are well prepared for peak trading and the early signs from our activity to date confirm that we are moving in the right direction towards a successful and profitable future for Debenhams.”

Bucher said the retailer is ”embarking on several strategic partnerships” that will be “key to accelerating the pace of change”. These include partnering with fitness business Sweat to trail gyms in three stores and this month updating its mobile website in partnership with mobile shopping platform Mobify.

The retailer has also established “test labs” to trial new formats and approaches in its Stevenage and Wolverhampton stores. It said these are “delivering very positive initial results”.

The trails have included hiring staff for their “attitude” rather than skills, as the latter “can be taught”.

Bucher added: “We want people on the floor who love working there… if we get this right, our customers will know the difference. In the UK there’s a big shopping culture and city centres are a place where communities come together, and we want to be part of that.”

 

Readers' comments (4)

  • Debenhams needs a total rebrand, with less stores and a more premium outlook if it wants to be serious player in the long term.

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  • Does this mean suppliers will be expected to give Debenhams a discount again?

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  • Reduced profits far better than the fall experienced by John Lewis.

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  • Will suppliers be asked to take enforced Gym Membership???

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