Thursday 20 April 2017

Debenhams Jobs At Risk As Stores Are Closing


The new chief executive of Debenhams is to give the department store chain an expensive makeover after admitting some shops looked tired and old and customers had to go on a “treasure hunt” to find what they wanted.

Sergio Bucher, who joined the retailer from Amazon in October, polled 16,000 shoppers before drafting a turnaround plan to focus on “social shopping” and making store visits a “fun leisure activity”.

As part of the overhaul, Bucher warned that 10 of its 176 stores had been earmarked for closure unless their performance improved and several warehouses would close, putting several hundred jobs at risk.

“Some of our stores look tired and old, the online experience is not as good as it could be and we have so many promotions our customers struggle to know when it’s the right time to shop,” said Debenhams chief executive Sergio Bucher.

The retailer will devote more floor space to new restaurant brands as well as nail and blow-dry bars as women prioritise spending on treats such as facials over wardrobe updates.

It will look to turn “functional” trips to pick up internet orders into “experiences” by offering the chance to combine the collection with a consultation with a personal shopper and a glass of prosecco.

The need for shop closures raised eyebrows in the City as the chain was trumpeting the potential for it to expand to 240 stores five years ago. To cut costs, Debenhams is shutting one of its three main warehouses, in Lodge Farm, Northamptonshire, which employs 220 people, as well as 10 smaller warehouses, all run by logistics company DHL.

The update came as Debenhams posted a pre-tax profit of £87.8m in the six months to 4 March, down by 6.4%.

Debenhams is best known for the Designers at Debenhams collections created over the past two decades by designers including Jasper Conran, Julien Macdonald and Ben de Lisi. Designer Betty Jackson has already been dropped and Bucher admitted other brands “had lost some of their currency” and would be reviewed.

GlobalData analyst Kate Ormrod said the crux of Debenhams problems was that it sold “undesirable product” especially in clothing, where it has been losing market share for the past five years.

“The plan to manage the Designers at Debenhams portfolio more robustly is long overdue,” said Omrod. “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.”

Debenhams, which employs 30,000 people, said it was moving 2,000 staff from back office roles on to the shopfloor in a bid to improve customer service. It will “declutter” stores by reducing clothing options, such as colour, by 12%.

The turnaround plan will involve increasing annual investment in stores and website from £130m to £150m, most of which will be spent on upgrading the mobile and online platform. The shakeup will cost an extra £50m in total over the next three years.

“Debenhams is like a treasure hunt. There is some great stuff, but you have to work hard to find it,” said Bucher. “The backdrop to this is that our customer has changed and we need to change, too. Customers are increasingly living their lives on mobile phones.”

Bucher was brought into replace Michael Sharp in 2016 after shareholders pushed for a change at the top following a series of poor results and profit warnings. But his grand plan did not seen to impress the City with the shares closing down 5% on Thursday. Some analysts complained that Bucher failed to set himself any targets or quantify the likely return on investment.

“This turnaround plan seems less radical than what might be ultimately required for Debenhams to remain relevant on the high street,” said Jon Copesake, retail analyst at the Economist Intelligence Unit.

“Just 10 proposed store closures is modest given the size of Debenhams’ national store network. Equally, in-store dining and beauty services could fall short in their endeavours to recapture footfall. Debenhams are taking a step in the right direction but it needs to be the first of many.”



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