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Debenhams reports slowing, but more profitable, online sales

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Debenhams today said online sales growth had slowed as it changes its approach to promotions and looks to sell more items at full price. However, it said the new approach had made its ecommerce sales more profitable.

The department store chain said ecommerce sales grew by 8.4% in the 15 weeks to June 14, when they made up 15.2% of total retail sales. Like-for-like sales over the same period fell by 0.7% across the company’s retail channels in response to a new strategy of cutting down on the number of sales it runs. The summer sale, for example, will be held two weeks later this year than last year, while other discount events have gone from the calendar.

Debenhams said that so far its strategy to refocus promotional activity resulted in more full-price transactions compared to the same time last year. That in turn had improved profit margins.

“We have seen a slowing in the rate of sales growth online but this is only to be expected given the level of promotions we ran during the period last year as we sought to clear excess stock,” said the Debenhams interim management statement today.

The company now aims to boost its online sales growth rate through improvements to service, including a wider range of premium delivery options, to be introduced ahead of the Christmas season in order to meet demand for more convenience. Cut off times for next day delivery will move to 10pm from the current 2pm, while evening, weekend and nominated day delivery will also be introduced. At the same time, click and collect orders will be fulfilled from store stock where possible.

“We are confident that these improvements will improve choice for our customers, drive sales and allow us to recover a higher level of fulfilment costs and as a result we would expect to see the rate of online sales growth increase once these services are available,” said the statement.

Michael Sharp, Debenhams chief executive, said: “The foundation of our business is the strength of our product proposition which meets our customers’ needs for choice, quality and value. In April we set out five priorities to address the challenges that Debenhams faced in the first half of the year. Our performance in the second half reflects the work we have done, particularly to refocus our promotional activity. Although early days, this strategy is delivering higher full price sales and we expect to see the benefit through gross margin progression in the second half of the year and in 2015.”

In other highlights, the company said it would trial Sports Direct and Costa Coffee concessions in its stores.

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