Debenhams to close up to 50 stores

Debenhams store closures.
Debenhams store closures.

Retail giant Debenhams has said it will not be disclosing whether or not its Derry store will be affected by up to 50 proposed closures over the next five years.

The company announced on Thursday that a comprehensive review of its portfolio was under way and that it would be prioritising investment in around 100 stores while closing up to 50 stores over 3-5 years.

Asked by the 'Journal' if Derry would be affected a Debenhams spokesperson said: “We have identified up to 50 stores, accounting for under 15 per cent of total sales, which are currently profitable, but where we do not see a long term future and which we intend to exit over the next three to five years. This is an ongoing five year programme and we are not disclosing a list of these stores.”

In preliminary results published this morning Debenhams said high rental costs rather than a "long tail of loss-making stores" had prompted the move.

The retailer said occupancy costs (including rent, rates and service charges) account for around £290m or approximately 13% of its current Gross Transaction Value (GTV).

The firm said: "Our analysis shows that approximately 110 of the 165 UK stores are currently over-rented. We therefore face a potential annual occupancy cost headwind of c.£12m.

"We are, however, actively in discussions with landlords about reducing and regearing opportunities to mitigate this headwind, benchmarking against recent changes achieved by some competitors.

"As part of the original store portfolio analysis informing the Debenhams Redesigned strategy, we identified up to 10 stores as at risk of becoming unprofitable and closed two in January 2018, at Eltham and Farnborough. Currently c.10 stores are making small losses following the decline in UK performance in FY2018."

Sergio Bucher, CEO, commented: "It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.

"Working with our new CFO Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline and to prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time.

"Debenhams remains a strong and trusted brand with 19m customers shopping with us over the past year.

"Our transformation strategy is gaining traction, with positive results from new product and new formats, general acclaim for our store of the future in Watford and digital growth that is outpacing the market.

"With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future."