Debenhams chief executive Rob Templeman and deputy chief executive Michael Sharp talk consumer confidence, promotional activity and currency issues.
Your Christmas sales performance was better than expected, presumably it was boosted by a lot of discounting in the run to Christmas?
Rob Templeman: Not really. If you count up how much time we spend on Sale before Christmas our promotional activity was not a lot greater than last year. We did extend one of our promotions but we’ve been controlling our costs tightly and our gross margin is flat.
What has helped you keep sales levels up?
Rob Templeman: It’s about having the right product. Our Designers at Debenhams ranges have been up double digits, and market share is up across all categories. I thought we’d lose market share in October because we didn’t have as high stock levels. But in December menswear and womenswear market share was up.
How will you drive business once the Sales are over?
Rob Templeman: The January Sales have been strong across the high street, with footfall up, and there’s some suggestion that the customer may have an easier time, with lower interest rates. But the big concern is unemployment. But we will be one of the first retailers on the high street out of Sale.
Michael Sharp: Once the Sale finishes the mindset of the shopper will change and they will be looking for newness. We will focus on making sure that there is fresh product in store. We will put new spring stock in by the middle of this week, which is about a week earlier than last year. We will also focus on value for money.
What trends are you backing for spring?
Michael Sharp: Some of the trends are the Libertine look with things like paper bag waists and tailoring. There will also be a Glamour trend, which will feature things like baggy pants tapered at the ankle. There will be prints, kaftans and dresses.
How will the weak sterling affect Debenhams?
Rob Templeman: We generally hedge much further forward than a lot of high street retailers, typically 18 months ahead - the average is around six months. We’ve taken a more prudent view because we want to have the certainty. So we’re hedged from a year and half from last September, the start of our fiscal year. I think this gives us some competitive advantage.
There’s been a lot of noise about currency but it’s not just about that - commodity prices are down significantly and container costs are down about 30%, so you have to look at it all together.
Is the growing demand from retailers to pay rents on a monthly basis something that Debenhams is also pushing?
Rob Templeman: We are a member of the British Retail Consortium and we support Sir Philip Green’s [Arcadia owner] to push for better deals from landlords. Of course we’d all like to pay monthly and we do on some of our new stores, but it’s not something that we’re talking about for all of our shops.
How will Debenhams drive sales in 2009?
Rob Templeman: It’s going to be a very challenging year and what we have to do is get the product right, which we have been doing for the last nine or 10 months. We have to give great value for money and be consistent. Part of the premium market is trading down and some people are trading up from lower priced product to designer brands that offer great value and we will benefit from that.
How much promotional activity will there be at Debenhams this year?
Rob Templeman: We have our plan but we don’t want any panic measures. Debenhams has always been a promotional business and it always will be. The customers like it, it brings market share gains and the fact is that the margin is still flat.
Read the full story on Debenhams’ Christmas trading statement.