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Debenhams to shut stores

International

London - Debenhams Plc said it will shut stores as a new chief executive officer recruited from Amazon.com Inc. taps his experience at the e-commerce provider to try to revive the UK retailer’s flagging sales via a stronger online offering.

Debenhams, which operates a flagship store on London’s Oxford Street, said it will close as many as 10 UK outlets over the next five years and begin consultations on shutting one of three central distribution centres.

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The announcement came the same day that competitor Marks & Spencer Group Plc unveiled the first details of a five-year program to add dedicated food stores and shut some of its main town-centre sites.

“Our customers are changing the way they shop and we are changing too,” Debenhams CEO Sergio Bucher said in a statement Thursday.

Debenhams and Marks & Spencer are adapting to a climate where the growth of convenience stores and online shopping are causing retailers to scale back their traditional town-centre presence. Sterling’s decline in the wake of the Brexit vote has added to pressure on company profitability by increasing import costs.

Debenhams shares fell as much as 5.9 percent after the retailer said pretax profit for the first half fell 6 percent to 88 million pounds ($113 million). The company also said it considering scrapping some in-house brands amid concerns those younger shoppers are shying away from offerings such as Jasper Conran and John Rocha.

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Bucher replaced Michael Sharp in October, having spent three years as a fashion executive at Amazon. He also previously worked at sportswear maker Puma SE and Spanish clothing retailer Inditex SA.

The revamp at Debenhams is aimed at reducing clutter and replenishing stocks more quickly, a key element of Inditex-owned fast-fashion chain Zara’s success, the UK company said.

The investments in digital offerings are aimed at targeting shoppers via mobile devices, so that they visit stores more regularly, the company said. Debenhams plans to develop its Click & Collect service to link it with features such as personal shopping and said it sees opportunities for partnerships with e-commerce providers.

Read also: Shop shuts its Santa's grotto to avoid confusing children

Marks & Spencer plans to open 36 new stores in the next six months, all but two of them being dedicated food stores. The retailer also proposes closing six stores, including four mainstream town-center outlets. About 1,400 new jobs will be created and staff at the stores being shut will be redeployed at nearby outlets, the company said.

Debenhams said it expects its gross margin for the year to fall 25 basis points, highlighting the challenges facing bricks-and-mortar retailers seeking to adapt to the world of online shopping.

“We believe Debenhams remains structurally challenged by a customer proposition lacking differentiation and an inflexible store estate, forced to continue investing in assets delivering a lower return,” Berenberg analysts including Michelle Wilson warned in a note.

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