British heritage brand Debenhams (DEB) edges 0.2% higher to 46.1p as full year results meet downgraded expectations. Investors are also focusing on positive early signs from its ‘Debenhams Redesigned’ turnaround strategy.
Yet the subdued share price reaction suggests many investors remain unconvinced by the chances of success for the department store operator’s ambitious (and costly) makeover.
Results for the year to 2 September reveal a 16.6% slump in underlying profit before tax to £95.2m, in-line with downgraded market expectations.
While group like-for-like sales grew 2.1%, the UK same-store performance was flat, reflecting weaker second half trading and also the impact of shoppers switching online.
Beauty and food categories were in growth, though clothing sales declined as the market worsened in the second half of the year.
SUCCOUR FROM SERGIO
In April, CEO Sergio Bucher (pictured below) unveiled a new strategy, Debenhams Redesigned, to position the structurally challenged, over-spaced retailer as ‘the leader in Social Shopping - shopping as a fun leisure activity centred around mobile interaction with our customers.’
He outlined some bold aims to ‘drive Growth by becoming a Destination, Digital and Different, and Efficiency by simplifying and focusing our operations’; further store and warehouse closures are announced today.
Bucher insists ‘we are making good progress with implementing our new strategy, Debenhams Redesigned, and are encouraged by the results from our initial trials, as well as the number of exciting new partners who want to work with us.’
The former Amazon executive is investing heavily in Debenhams’ app and website, while filling up excess sales space with gyms, restaurants and other social spaces.
Debenhams has upgraded its mobile website in partnership with Mobify, invested in blow LTD., the UK's leading digital beauty services provider, and partnered with ‘friendly fitness’ operator Sweat! to trial gyms in three Debenhams stores.
Bucher’s outlook statement heading into the peak trading period is cautiously optimistic: ‘The environment remains uncertain and we face tough comparatives over the key Christmas weeks’, says Bucher.
He adds ‘we are well prepared for peak trading and the early signs from our activity to date confirm that we are moving in the right direction towards a successful and profitable future for Debenhams.’
However, ETX Capital’s Senior Market Analyst Neil Wilson comments: ‘Debenhams would appear to embody many of the struggles facing the high street. Shoppers are going online; the weak pound is pushing up input costs, hitting margins; and labour costs are rising.’
Wilson continues: 'The answer for Debenhams at least is to get its mobile shopping experience better than anyone else. With sales growth of 57% in this segment it looks like it’s on the right track.'
