Debenhams unveils turnaround strategy

Department store group Debenhams has announced a turnaround strategy aimed at boosting its appeal as a "destination" shop and improving its online service.

The plan means up to 10 of its 176 UK stores may be closed over the next five years.

A central distribution warehouse and about 10 smaller warehouses could also be shut.

Meanwhile, the group said its half-year pre-tax profits fell by 6.4% to £88m.

Debenhams shares were down by nearly 5% following the announcement.

Chief executive Sergio Bucher, who joined the company last October, said its customers were changing the way they shopped and therefore Debenhams was also changing.

"We will be a destination for social shopping, with mobile the unifying platform for interacting with our customers," said Mr Bucher, who was appointed with a view to shaking up the business.

Debenhams said that leisure activities accounted for an increasing share of consumer spending and that the "leisure experience is an important part of shopping", while "mobile interaction" was growing fast.

In an effort to capture this market, Debenhams plans to step up investment in its in-store cafes, restaurants and beauty services.

Retail analyst Steve Dresser, of Grocery Insight, said it would be tricky for Debenhams to make its new approach work.

"Without a core reason to visit Debenhams, or a point of difference, footfall and sales fall, which in turn impacts profitability," he said.

"Shopping centre locations overcome footfall concerns, but in turn, rents are expensive."

'Fit for the future'

Debenhams said it had no "tail of loss-makers" in its 176 UK store estate and, in fact, many were "highly profitable".

However, it added, it wanted to "ensure they are fit for the future".

The 10 stores under review for closure, if they are deemed not profitable enough, have not been named.

Debenhams said the rest would be "refreshed" and "remerchandised" to raise their profitability.

In January, it began "decluttering" its stores by reducing the number of lines for sale.

It is also switching about 2,000 of the stores' backroom staff to jobs where they deal directly with customers.

The group also has plans to open four new shops in the UK.

'Disappointed'

Debenhams has 82 stores in 26 other countries.

It said it would leave some "non-core" international markets, with details due to be announced in October.

The department store chain announced earlier this year that it had begun consulting on the closure of one central distribution centre in Northamptonshire which employs about 200 people.

It is hoped all staff will be redeployed.

Debenhams is also consulting on the closure of about about 10 smaller regional warehouses which are connected to stores.

Those staff will be moved into the stores.

Sir Ian Cheshire, the chairman of Debenhams, said "this is a strategy about growth", not job losses, and that the plans should lead to the creation of more jobs.

However, independent retail analyst Nick Bubb said he was "disappointed" that the strategy did not include any targets for sales and profits, despite the talk of growth and efficiency.