Debenhams Altrincham
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Debenhams expands store closure plan

Embattled department store group Debenhams has identified a further 40 stores where it “sees no long term future,” meaning 50 stores in its 166-strong estate are likely to close over the next three to five years.

The group this morning reported a £491.5m annual loss in a year that has seen it issue three profit warnings. Last month, KPMG was appointed to look at ways forward for the business.

Debenhams, which traces its lineage back to the 1770s, has long been a fixture in a number of North West towns and cities, with shops in Manchester and Liverpool, along with Altrincham, Chester, Warrington, Stockport, Oldham, Bolton, Bury, Preston, Blackpool, Blackburn, Southport, Wigan, Carlisle and Workington.

Debenhams also has an outlet at Cheshire Oaks and a North Wales estate encompassing Wrexham, Llandudno and Bangor.

Although it reported a profit of £59m a year ago, storm clouds have been gathering over Debenhams and it has reported exceptional write-downs of £512.4m, relating to goodwill and store impairment, lease provisions and systems write-offs. Before charges relating to its Debenhams Redesigned strategy, it said underlying profit stood at £33.2m – like-for-like sales did decline, but only by 2.3%.

Debenhams said in today’s results that 110 of its locations are over-rented, and that it is looking to reduce and re-gear an occupancy cost headwind of £12m.

The group said that, other than the ten stores already earmarked for closure, all are currently contributing positively, but that “rolling forward current trends, we do not believe that they will remain profitable in future years”. Eighty per cent of the group’s gross transaction value, and a higher proportion of profit, come from 100 stores in “flagship and vibrant markets”. The balance of the group’s estate will be looked at on a store-by-store basis.

Beauty is at the forefront of the group’s attempts to reposition and differentiate itself. It has invested in an online beauty community, while in September, Debenhams opened an 86,000 sq ft store at Intu Watford, with the centrepiece being a beauty hall occupying 15% of the store’s space, including a hair lab, bar and “beauty clubhouse”.

Other features of the store include a free personal shopper service, a reduced product range and flexible fixturing. Based on this, the group said today that “we now have a clear vision of what the future of our stores could look like”.

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Logically these store closures will show that rents are too high which should eventually reflect in RVs and level the playing field with the Internet wharehouse – which must surely go in the opposite direction. Shame there is so much pain and time to get to what should be a common sense adjustment.

By Anonymous