Debenhams share price falls as it considers 10 department store closures in turnaround plan after profits fall

 
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Debenhams saw profits fall (Source: Getty)

Debenhams has said it will consider closing 10 stores in the next five years after reporting profits fell for the last six months.

The department store will "review" the performance of UK stores, which City A.M. understands are currently profit-making, and leave some of its brands and peripheral international markets, it said.

It will also reduce the number of options for sale by 10 per cent and consult on closing one central distribution centre and around 10 smaller regional warehousing facilities.

Shares were down 5.9 per cent by mid-afternoon.

The figures

Profit before tax fell by 6.4 per cent to £87.8m, in line with market expectations, with earnings per share of 5.8p.

Earnings for the group fell by 2.5 per cent as UK earnings fell by six per cent, despite a two-thirds increase in mobile orders. International earnings were a bright spot, with 13.1 per cent growth.

The group also reduced some of its debt pile to £216.9m.

Why it's interesting

The overhaul Debenhams has announced has been widely trailed, with the department store's chairman recently saying the retailer was selling too much "stuff" and not offering enough in the way of an experience.

Management will hope the move to cut down stock offerings will reduce the tyranny of choice for consumers, and may also have the upshot of cutting costs (and jobs) in warehousing and distribution as processes are simplified.

Debenhams also says it plans to move 2,000 employees from the back office (in roles like stock control) to customer-facing jobs in an effort to become a "destination" for shoppers.

Debenhams will also look to improve its mobile offering and aim to unify the mobile and in-store shopping experience.

What Debenhams said

Sergio Bucher, chief executive of Debenhams, said: "Our customers are changing the way they shop and we are changing too.

"We will be a destination for "Social Shopping" with mobile the unifying platform for interacting with our customers."

In short

The department store says "Debenhams Redesigned" will deliver growth "by becoming a Destination, Digital and Different". Clearly it thinks things need to change, with a pledge to fix the basics in order to get profits back on track.

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