Debenhams plans 50 store closures as profits tumble

Debenhams will close 50 of its 166 stores as it revealed a record loss of £491.5 million in its full-year results ending 1 September 2018.

The struggling department store has been stung by exceptional costs of £512.4 million relating to IT systems as well as store and lease provisions.

Before the write down, Debenhams said it generated £33 million in profit before tax.

“It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging. Working with our new CFO Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline and to prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time,” said Debenhams CEO, Sergio Bucher.

Mobile and store improvement plans

Like-for-like sales dropped 2.3%, but digital growth increased from 10% in the first half of the year to 16% by year-end. Mobile also increased by 20% supported by improvement in smartphone conversion up 17%.

In February 2019, Debenhams plans to move its desktop customers to its existing Mobify progressive web app solution, which will provide a “consistent and scalable experience” across its digital channels. It is also in the process of using data analytics surrounding search behaviour to build online ranges. Finally, the retailer is also working with Google to ensure local store information can be surfaced alongside adverts in hopes to drive traffic into stores.

The retailer also plans to assess the performance of its “store of the future” stores in Watford Junction and six other locations which were modernised this year to determine investment going forward. Meanwhile, it plans for 40 stores to have a redesigned beauty hall, while 120 will have new gift presentation and around 75 will have new food and drink offerings.

Bucher added: “Debenhams remains a strong and trusted brand with 19 million customers shopping with us over the past year. Our transformation strategy is gaining traction, with positive results from new product and new formats, general acclaim for our store of the future in Watford and digital growth that is outpacing the market. With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future.”

Catherine Shuttleworth, CEO and founder of Savvy, commented: “After a year of well publicised struggles they have been very open about the way in which they will need to restructure to stay afloat. With £1 in every £5 spent at Debenhams online (and growing), it comes as no surprise that we hear of a reduction in physical store space. With Mike Ashley’s share in the Debenhams business still at around 30%, speculation is still likely to exist about his involvement in the business and no doubt he will have strong thoughts moving forwards.”