LONDON — Debenhams has officially joined the struggling U.K. retailers club, posting losses in the multimillions and planning to shut up to 50 stores as part of a major restructuring plan.
The British department store group said Thursday that for the 52 weeks to Sept. 30, losses amounted to 491.5 million pounds, compared with a 59 million pounds profit last year. The losses came mainly from write-downs and other restructuring measures.
Group revenues were 2.28 billion pounds, a decline of 2.5 percent on the previous year’s figure of 2.34 billion pounds, while earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 27.5 percent to 157.3 million pounds.
Debenhams is reviewing its store portfolio and looking to shut 10 to 50 units over the next three to five years. An additional 50 million pounds of costs will be cut, while future investments will focus on revamping best-performing stores according to the company’s new Debenhams Redesigned model.
“It has been a tough year for retail in 2018 and our performance reflects that,” said Sergio Bucher, the retailer’s chief executive officer. “I am determined to maintain rigorous cost and capital discipline, and to prioritize investment to achieve profitable growth.”
He said that, at the same time, the company is taking tough decisions on stores where financial performance “is likely to deteriorate over time.”
Bucher added that he is banking on the sense of trust and loyalty associated with the Debenhams brand, and sees potential in the company’s new store designs and online business, the growth of which is outpacing the market.
The retailer’s fashion and beauty departments, its core divisions, didn’t show any signs of growth, with like-for-like sales dropping 2.3 percent despite ongoing efforts to refresh the product offer and incorporate new, digital features on the beauty floor.
Food was among the few categories showing signs of growth, with a 10 percent sales increase, across both owned and concession formats.
“The Debenhams announcement highlights just how unfit for purpose the department store model is in today’s retail environment,” said Harsha Wickremasinghe, head of business intelligence at Livingstone, the international midmarket and debt advisory firm.
Wickremasinghe said Debenhams’ “above-market growth” in digital sales remains well below 20 percent, “which is simply unacceptable. Culling 50 stores shows how years of underinvestment has taken its toll on the retailer, which risks losing its relevance entirely, if it fails to adapt in short order.”
Debanhams is the latest U.K. high-street retailer to struggle with engaging modern-day consumers and follows on the footsteps of House of Fraser, which sought bankruptcy protection last July and was bought by Mike Ashley for 90 million on a last-minute deal.
Marks & Spencer has also been downsizing, outlining plans to close up to 100 stores by 2022 and put the focus on its food business.