* Stores "look tired and old" - CEO
* Could close 10 of 176 UK stores
* To invest in mobile, supply chain, stores
* First half profit falls 6.4 pct
* Shares fall up to 5.9 pct
(Adds CEO, analyst comment, shares)
By James Davey
LONDON, April 20 Debenhams, Britain's
second-biggest department store operator, said on Thursday it
would return to growth by closing a few stores, revamping the
rest and improving its online service, but concerns about the
cost sent its shares lower.
After a strategic review by new Chief Executive Sergio
Bucher, a former Amazon and Inditex executive, the
group also said it would seek efficiencies by simplifying the
Debenhams, which posted a 6.4 percent fall in first-half
profit, said up to 10 of its 176 UK stores would be reviewed for
closure in the next five years, while consultation had begun on
closing one central distribution centre and about 10 regional
Debenhams, ranked second by revenue behind department store
chain John Lewis, has struggled in Britain's intensely
competitive retail market in recent years as consumers spend
more on holidays, eating out and events.
“Customers have changed and we need to change too. Over the
past four years growth in leisure has been 60 percent higher
than growth in retail sales," Bucher said, adding customers were
also "increasingly living their lives through their mobile
Debenhams has 19 million UK customers, but Bucher said there
was still a lot to fix.
“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," he said.
He said some customers complained that Debenhams had "got
really great stuff but you have to work hard to find it.”
Bucher said he would upgrade mobile systems and the supply
chain and invest in stores. Growth would come from offering new
products and services, building on strong areas, such as beauty,
make-up, handbags, swimwear, costume jewellery and footwear.
"We want to grow beauty to a 1 billion pound ($1.28
billion)business," he said.
Debenhams would switch about 2,000 more staff to customer
facing roles, declutter stores with a 10 percent reduction in
stock and replenish stock faster. In-store catering would be
The firm would also exit some brands and non-core
international markets, Bucher said.
Shares in Debenhams, already down a third over the past
year, fell up to 5.9 percent as investors fretted about the
short-term costs and execution risk of the plan.
Annual capital expenditure would rise from 130 million
pounds currently to 150 million pounds between 2018 and 2020,
while exceptional costs in 2017-2020 would be 50 million pounds.
"The risks, aside from execution risk..., are that profit
before tax is impacted if Debenhams is forced to lower clothing
prices to maintain market share," said RBC analyst Richard
Chamberlain, who has a "sector perform" rating on the stock.
He said Debenhams could become more cautious on cash returns
and closing stores could be expensive given average leases of 20
Debenhams said pretax profit fell 6.4 percent to 87.8
million pounds ($112.5 million) for the 26 weeks to March 4, in
line with market expectations, on revenue up 2.9 percent at 1.68
billion pounds. The interim dividend was maintained at 1.025
($1 = 0.7798 pounds)
(Editing by Kate Holton and Edmund Blair)