Debenhams’ downwards spiral: continued on fifth floor
Comment Martin Flanagan
The problem for Sergio Bucher, the CEO charged with the turnaround of struggling Debenhams, is that he is not even winning the retreat.
The former Amazon executive’s one-year stewardship of a retailer on the ropes has reached for all the standard levers. Close stores, tick tart up retained outlets, tick; improve the online offering and become a bird of prey on costs, tick, tick.
But retrenching to victory has not worked so far. Debenhams seems to be running to stand still, yesterday issuing its second profit warning in four months as the City seems unimpressed.
The shares took another hit yesterday, having more than halved in the past year, and the dividend has been drastically rebased downwards.
Sometimes it seems t’was ever thus with the troubled department store group. Debenhams has been in and out of private equity, and both embraced and rowed back on price promotions (like most ambivalent retailers in these tough times for the high street).
To paraphrase Wilde, the only thing worse than cutting prices is not cutting prices. Metaphorically, in both strategy and boardroom upheaval, Debenhams resembles the revolving doors many department stores favour.
It is caught between a systemic rock and a cyclical hard place. Online shopping has replaced emporium-sauntering. And over the past couple of years or so retailers have noted a marked consumer shift away from clothing purchases (a sector staple) towards holidays and entertainment.
The latter is a sort of retail version of millennials believing they cannot get on the housing ladder, and instead going travelling and chilling with Netflix.
The bad news mounts. Debenhams’ chief financial officer Matt Smith is quitting to join rival Selfridges: difficult to envisage finance directors queuing round the block to replace him given the commercial twilight zone the group is in.
Debs is not alone in its troubles. House of Fraser, whose store chain includes Jenners in Edinburgh, yesterday called in KPMG to advise on yet another “restructuring”.
Store closures and job losses, the now standard-issue Company Voluntary Arrangement, possibly loom. If ever a sector was walking up the down escalator…