Debenhams revises promotional strategy as profits tumble

Debenhams said it was refocusing its strategy, which will lead to more clearly defined Sale periods with fewer days on promotion.

Debenhams chief executive Michael Sharp said: “We’ll have more light and shade in our calendar. It [promotions] needs to be focused on our customer mindset and not focused on what our competitors are doing.”

It will retain its 16 weeks of full Sale but would withdraw some of its smaller events which he said had “diluted the impact” of its larger events.

The department store pre-tax profits sunk 24.5% to £85.2m as gross margin dropped 2.1% over the 26 weeks to March 1. The retailer said profits were hit as its discounts over December were diluted by the highly promotional market.

Group like-for-likes edged up 1.5%.

UK sales increased 1% to £1.27bn while international revenue jumped 6.8% to £299.1m.

Sharp said: “While this has been a challenging first half, we are clear on the issues and are taking decisive action to address them. In particular, we are focused on building a more competitive multichannel offer for our customers and improving the operational effectiveness of the overall business.

“Our delivery options as it stands are not competitive. Customers who are looking for the convenience of next day delivery to home or with a late cut-off have shopped elsewhere.”

The retailer said convenience was an important driver of customer behaviour pre-Christmas, which it said “favoured retailers with a better developed multichannel model” than Debenhams.

The department store group is ramping up its multichannel offer and is introducing a range of premium delivery options over the next six months in time for peak this year. This includes next-day click-and-collect, extending the next-day delivery cut-off from 2pm to 10pm to capture peak shopping hours and introducing nominated-day delivery, including Saturday.

Debenhams is also doubling the amount of store space allocated to click-and-collect. It is also accelerating its investment in automation in distribution centres for peak and improving its mobile platform.

The retailer launched next-day delivery in September, which accounted for 50% of orders in the run-up to Christmas Day. Click-and-collect accounted for 24% of online orders from 7% last year.

Debenhams said about 10% of its UK store space is delivering ”sub-optimal” sales densities, which it is hoping to improve through introducing new products, brands and services. It is in discussions with a “number of well-known brands” and expects to trial some in store over the next six months.

New shareholder Sports Direct is one of the brands it is in discussions with.

Sharp said: “Our sportswear business is small. They are good at sportswear and our customers are obviously buy sportswear so clearly they’re buying it somewhere else. So clearly there’s an opportunity for Debenhams to sell sportswear.”

The retailer has also vowed that every store will have a restaurant or cafe next year and is trialling a third-party food offer.

It said its revamped Oxford Street store, which finished in February, had delivered “encouraging” results.