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Debenhams’ profits decline


British retailer Debenhams is expected to report a fall in annual pre-tax profits come Thursday, making this the second consecutive year of declining profits for the department store.

Beleaguered after disappointing Christmas trade last year, Debenhams discounted merchandise heavily in an attempt to improve sales during what should have been a busy festive season. Subsequently, the retailer was forced to issue a profit warning in January and now shares have lost nearly a fifth of their value for 2014. City analysts are predicting the retailer’s full-year profits have fallen by 20% or more.

Chief executive of the company, Michael Sharp, is remaining sanguine. His plan to restore the company’s performance involves cutting back on the number of discounts. It is expected that the department store chain will report a significant reduction in the number of days it has held promotions, in comparison to last year.

Sharp is also attempting to boost online business with an overhaul and, most notably, welcome more concessions into stores. The latter comes as a bid to make best use of store space, following on from the identification earlier this year that 10% of Debenhams’ space is inefficient.

Deals have been struck with the likes of Costa Coffee, Sports Direct, Mothercare and Monsoon to take over floor space and drive sales. Most significant, is the deal with Sports Direct founder because Mike Ashley, who has built a holding of 11% in Debenhams.

The retailer will need to be careful with its approach to ensure stores themselves don’t resemble shopping malls. It will also need to be mindful of direct competition with standalone stores of those concessions.

Hoping for a better Christmas this time round, Debenhams will also work to improve its delivery options with next-day click and collect as well as a 10pm cut-off for next-day delivery.

Published on Monday 20 October by Editorial Assistant

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