Third of chain to close
Debenhams planning to shut 50 stores as losses mount
Debenhams announced a big loss
Department store chain Debenhams has announced the closure of almost a third of its outlets in a savage overhaul of its business.
It has confirmed that 50 of its 166 stores will shut over the next three to five years as it revealed a record £491.5m annual loss. The company has 16 in Scotland.
The closure figure is a sharp increase on 10 that it previously indicated were likely to close and the latest bombshell will take another 4,000 jobs out of the retail industry. There will be no dividend and the company will seek cost savings of £130m by 2020.
The company announced that about 20 stores will be converted to a new lower-cost model, suggesting a two-tier structure for the group.
In a statement with the group’s annual figures, Sergio Bucher, CEO, said: “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.
“Debenhams remains a strong and trusted brand with 19m 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.”
The chain has been the focus of much speculation since rival House of Fraser collapsed in August and last month appointed KPMG to help improve its performance and maximise shareholder value.
It has issued three profits warnings this year.
Mike Ashley, who acquired House of Fraser, is a big shareholder in Debenhams and analysts will be keen to hear if he has any plans for rescuing the business amid speculation that he could merge them.
The crisis at Debenhams coincides with new data from the British Retail Consortium which shows a drop in the total number of employees in the retail industry and in hours worked.
A fifth (21%) of retailers indicated plans to reduce staff in the coming quarter compared to none at the same point last year.
Helen Dickinson, chief executive, said: “The retail industry, the country’s largest private sector employer, continues to be under considerable pressure. While pay is growing much faster than in other industries, employment in retail continues to fall. And there are challenging times ahead, with a fifth of retailers indicating plans to reduce staff ahead of retail’s busiest quarter, when normally they would be looking to increase headcount.
“As the Autumn budget looms, the retail industry is looking to the Government to help alleviate some of the pressure of a broken business rates system. An indication that reform is coming would provide welcome relief to the industry and to those who work within it.”
David Lonsdale, director of the Scottish Retail Consortium, added: “The retail industry is undergoing profound transformation driven by changes in shopping habits, squeezed family finances, fierce competition, and rising costs. Public policy is pushing up the cost of employing people in stores – through the national living wage, higher statutory employer pension contributions, and apprenticeship levy – at the very same time as the cost and capability of digital routes to market become more attractive and affordable. This is upending many retail business models, and that can often be painful for the firms involved and for staff. What is clear is that the retail industry will look very different in the future.”