Struggling department store chain Debenhams is to accelerate plans to restructure head office, store and call centre teams, following disappointing Christmas trading.
Debenhams’ like-for-like sales fell by 1.3% in the 17 weeks to 30 December amid what the business described as a “volatile and highly competitive” UK trading environment. The retailer issued a profit warning as a result of the performance, saying profits for the full year will now be between £55m and £65m – steeply below the £80m expected.
The business said it needed to move “even faster” to implement “cultural and organisational changes” – which includes job cuts – to react to changing customer behaviour.
“We are accelerating aspects of our redesign strategy,” said a bullish Sergio Bucher, chief executive of Debenhams. “We’re going to move at a faster pace to make those cultural and operational changes to make sure we are fit for the climate. We want to simplify our structure. We need to reduce the number of levels in the company and become less hierarchical, so we can be more flexible and nimble.”
Bucher said “some jobs” would be axed as a result, but would not disclose a number or timeframe for the redundancies.
The retailer expects to make a cost saving of £5m as a result of the employee restructure in the second half of its financial year. A further £5m of savings will come from sourcing and renegotiating rent and rates.
In April the department store said it had earmarked 10 stores for potential closure, should they become loss making. Bucher said there were currently no plans to increase this number, but he was “constantly reviewing” the situation.
Debenhams increased its promotional activity in the run-up to Christmas to encourage shoppers to spend.
However, Bucher said he is still committed to reducing Debenhams’ reliance on discounting moving forward: “My strategy is to increase full-price sales and it remains. My mission is to get exciting products at the right price in front of customers. The environment was very promotional but our full-price market share in clothing has increased and we will continue to do that.”
Meanwhile, the chief executive blamed a poor performance on its gifting products for the lacklustre performance: “We had three years of successful gifting and last year it was one of our highlights. But we have made big learnings from this Christmas. Our offer [on gifting] hadn’t moved on fast enough. It wasn’t innovative or premium enough. A lot more of our competitors moved into the space this year. We won’t be investing in the Christmas crackers and Christmas cards next year.”
Bucher added that he was committed to his strategy to turn the retailer around: “I strongly believe in the future of department stores. Our strategy is strong, and we have made progress online. Trading has been difficult but that’s part of retail. I’m optimistic about the future of Debenhams. We need to get there quicker as business as usual won’t make us successful.”