Debenhams announces new strategy to return to growth

Debenhams, along with its interim results for the 26 weeks to March 4, 2017, announced a new strategy, Debenhams Redesigned, to deliver growth efficiency by simplifying and focusing on the business. The company said, group gross transaction value (GTV) for the period was up 2.9 percent to 1,676.5 million pounds (2,147 million dollars), with UK LFL up 0.5 percent.

"Our customers are changing the way they shop and we are changing too. If we deliver differentiated and distinctive brands, services and experiences both online and in stores, our customers will visit us more frequently and, having simplified our operations to make us more efficient, we will be able to serve them better and make better use of our resources," said Chief Executive, Sergio Bucher, in a statement.

Financial highlights of the period under review

Group gross margin rate was down 30 bps, with further 50 bps markdown improvement on last year offset by sales mix dilution, while full price sales mix grew 2 percent. Group EBITDA was down 2.5 percent to 149.1 million pounds (191 million dollars) compared to 153 million pounds (196 million dollars), with UK EBITDA down 6 percent and international EBITDA up 13.1 percent.

Debenhams said, UK online performance driven by mobile orders grew 64 percent. Underlying international performance was mixed with Magasin du Nord in Denmark seeing a tougher trading environment. Group profit before tax, the company said, was down 6.4 percent to 87.8 million pounds (112 million dollars). Earnings per share were 5.8p against 6.2p in the first half of last year.

Debenhams Redesigned,

The company added in the statement that objective of the new strategy is to define clearly what Debenhams stands for and simplify the way it operates to benefit customers today and therefore shareholders in the future. Aim to drive frequency of visit both on and offline as well as leveraging existing assets, including good stores in strong locations; leading market positions in key product categories; and profitable and growing international business.

As a part of its steps to simplifying and focus store estate and operating model; while making effective use of people, inventory and infrastructure, the company’s "Fix the Basics" plan is already under way to switch 2,000 more staff to customer-facing roles; de-clutter store environment with 10 percent reduction in stock options; replenish stock faster; test new concepts and formats for stronger and more relevant brand and category presentation; and evaluate store and brand portfolio. The company has decided to close up to 10 UK stores over the next 5 years, and exit some brands and non-core international markets.