Analysis: Will Bucher's blueprint revive Debenhams?

It’s never good to see an entire column of bracketed numbers at the top of a financial update, but it is becoming a characteristic at some long-struggling department store businesses.

Much of the department store market is at the mercy of current harsh conditions, even more than the average retailer, and Debenhams boss Sergio Bucher must be feeling pretty exposed.

But he did not let on this morning. Instead, he acknowledged that it “hadn’t been an easy half” but insisted he was “encouraged by progress we have made on transformation”.

“The figures were slightly worse than expected, and at the time of writing the share price was down 4.5%”

You need a close look to spot those signs of progress, but they do exist: beauty and food delivered positive sales.

Right-sizing the Uxbridge store resulted in store EBITDA rising 20%, while its new-look store in Stevenage has successfully adopted a cheaper and more flexible operating model, and is performing well.

And on the digital front, there is progression: digital sales grew 9.7% in the half, with digital EBITDA rising 10.3%.

Its mobile orders grew 35% in the first half, thanks to a partnership with mobile tech company Mobify, which has resulted in a 16% improvement in mobile conversion rates.

Unfortunately, that’s where the positives end.

The figures were slightly worse than expected, and at the time of writing the share price was down 4.5%.

Whitman Howard analyst Tony Shiret took what some might describe as a charitable view when he described the results as “kind of reassuring”.

But outside of the City, in the real world of shoppers, perhaps Debenhams’ situation looks rather bleaker.

Pre-tax profits plunged, down 51.9% on an underlying basis and 84.6% on a reported basis.

There were some exceptionals in the former number, but negative like-for-likes – store like-for-likes fell 4.1% – and the effect of competitor discounting, rather than investment (although there was that too), played a big part in the poor performance, and underlines the scale of the challenge faced by Debenhams.

Bucher admitted that some of its problems were self-inflicted, saying that some product was not up to scratch during Christmas, but also placed some of the blame on market conditions, such as the Beast from the East.

Turnaround plans

The sobering numbers mean that Debenhams is now accelerating its tunraround programme.

“I am excited about strategy,” Bucher said today. “It is not easy from the outside to appreciate the magnitude of what is going on inside Debenhams.”

What’s going on is downsizing some stores, re-engineering other space, upscaling its beauty offer by reinventing its beauty hall, phasing out its furniture, bringing in more concessions such as Swoon, Maisons du Monde and gym Sweat!, refreshing its Designers at Debenhams line-up and upping its food offer.

It’s certainly a lot to be getting on with. Unlike Bucher’s “social shopping” strategy, which nobody but him ever seemed quite able to define, these ideas are solid and should – theoretically – pay dividends.

Whether they are enough to save Debenhams in a market that shows no sign of getting any better is quite another.

Bucher told Retail Week that he expected to see signs of real change during the 2019 fiscal year, meaning that by September next year the situation should look very different.

It’s been argued before – including by Retail Week – that the City should give Bucher breathing space, but right now Debenhams looks like it is gasping for air.

Let’s hope that the numbers start looking up this time next year. Because if progress does not accelerate, he’ll be in real trouble.