Investors cheer recovery plans for Debenhams

Kasmira Jefford
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DEBENHAMS’ shares climbed four per cent yesterday as investors welcomed plans to refocus its promotional strategy after a disastrous first half in which profits fell by almost a quarter.

The department store group laid out plans yesterday to cut back on promotional activity, extend delivery times for online orders and partner with new brands to make better use of space in its stores.

Debenhams issued a profit warning on New Year’s Eve and parted ways with its finance chief after a strategy of slashing prices failed to boost sales over the crucial Christmas period.

Chief executive Michael Sharp said promotions over Christmas “were less effective” because of the fierce discounting across the high street, as retailers fought to win over customers.

Margins suffered as Debenhams was forced to continue discounting into the New Year, causing pre-tax profits to fall 24.5 per cent to £85.2m in the 26 weeks to 1 March.

Sales grew 1.7 per cent to £1.3bn and by 1.5 per cent on a like-for-like basis.

Sharp said while its big promotions like its Blue Cross sale will stay, smaller events “that create a lot of noise” will go.

The group has also identified around 1m square feet of space – around 10 per cent of its store estate – that could be performing more profitably and which its plans to tackle by introducing new concessions.

Sharp confirmed it is in talks with Mike Ashley’s Sports Direct – which took out an option to buy a 6.6 per cent stake in the business – about introducing sportswear into its stores.

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