Debenhams has put funding in place in order to give it the financial space to turn its business around. The multichannel retailer said today that it had extended its lending to give it access to another £40m over the next year as it continues to put its Debenhams Redesigned strategy in place. The strategy aims to transform it from a legacy department store business to one that employs new mobile and digital tools to engage shoppers at a time when they want to do more of their shopping online, and spend less time in stores.
Debenhams chief executive Sergio Bucher said: “Today’s announcement represents the first step in our refinancing process. The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders, and deliver a sustainable and profitable future for Debenhams.”
The Debenhams Redesigned strategy focuses on a social shopping approach that brings together stores and online with a focus on beauty, fashion accessories and food and events.
It comes at a time when department store business is moving online fast. The latest Retail Sales report from the ONS, for December 2018, shows that 17.8% of sales took place online during the month. In this, the category was second only to textiles, clothing and footwear stores (19.1% of retail sales online). In the previous month, November 2018, in which Black Friday fell, 19.7% of department store sales took place online.
In its transformation, Debenhams is looking to focus on the point where online meets the store – at a social point that includes eating in in-store restaurants, in-store advice from personal shoppers, the Debenhams’ Beauty Club, which brings together store events and an active digital forum, and its digitally-enabled beauty hall of the future. In the future, it has said, it expects digital to account for around 30% of its business – from 20% in autumn 2018 – and that will be centred around mobile interaction with customers. In its latest full-year report, to September 1 2018, Debenhams said that mobile accounted for 60% of all online demand.
The retailer also said then that it plans to close up to 50 under-performing stores over the next three to five years from a store estate of 165. Its plans include focusing on its own brands, and today the retailer, ranked Leading in the latest IRUK Top500 research, said it had struck an agreement in principle with Li & Fung for the LF Digital platform to improve its supply chain visibility. “This,” said Bucher, “will help us anticipate and respond more quickly to trends and our customers’ preferences, as well as delivering better quality product.”
Commenting, George Charles from money-saving website MoneySavingHeroes.co.uk said: “With every day that passes, another nail is driven into the coffin of the high street. On the surface, the news regarding Debenhams’s looks positive but it’s anything but that. They still need to close stores, which will lead to more people losing their jobs when so many already have.
“One issue Debenhams is now facing is that they were once seen as a high-end retailer and one of the only places you could buy some designers products whilst out shopping; this is what made them unique. However, now the internet offers an endless sea of designer goods at much cheaper prices. The lessening love for the high street hasn’t helped Debenhams in their bid to secure a long term future either.
“Debenhams is a business that issued three profit warnings in the last year alone, with a record pre-tax loss of £491.5m. Normally the Christmas period offers a safe haven for the high street retailers but for Debenhams it provided a sharp decrease in sales. This cash injection will help in the short term but there is a storm on the horizon, and it doesn’t look pretty.”
Image courtesy of Debenhams