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.
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.
Digital Investment
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.
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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.