Retail Viewpoints – Debenhams
Store closures on the cards as Bucher outlines strategy.
A mixed bag of results is typical from Debenhams, with today’s update no different: H1 UK GTV reached £1,345m, UK l-f-ls were up 0.5%, but domestic operating profit fell by 11.3% to £67.5m. Continued underwhelming trading has resulted in the retailer’s new turnaround strategy, Debenhams Redesigned, aiming to boost destination appeal via experiential retail and a unique offer, and drive online growth. A review of 10 UK stores (out of 165), as well as a distribution centre and 10 regional warehouses is also being conducted, with closures a distinct possibility over the next five years. Having stated in 2012 that there was potential for up to 240 stores across the UK & Ireland, this move serves to highlight just how the online channel has changed retailing, and that an extensive physical presence is simply uncommercial. Given Debenhams’ online proficiency and investment in the channel, we do not think the potential closure of 10 UK stores goes far enough.
While investment in revamping stores and improving the shopper experience will drive footfall, it is undesirable product which lies at the heart of its problems, especially in clothing – with Debenhams suffering from share erosion over the past five years. The plan to manage the Designers at Debenhams portfolio more robustly is long overdue given how extensive the range has become. The axe needs to fall on many brands, with the prime targets being Floozie by Frost French and Star by Julien Macdonald. Given the success of Nine by Savannah Miller, there is still life in the concept, but refreshing its designers more regularly is a must, and Debenhams must take action more swiftly if ranges are not working and lost relevance.
Beauty and gifting remain its star performers – with its Beauty Club scheme a key asset. Debenhams however needs to better leverage its thriving categories by driving cross-sector spending. Though worthy of investment, with no mention of homewares in the strategic update, it clearly remains an afterthought. CEO Bucher’s strategic plan gives Debenhams plenty to do over the next three years; and while focusing on experience and leisure will please existing shoppers, customer acquisition will remain a challenge given the impressive competition.
Source: GlobalData 20th April 2017