More than 50 stores of the famous but UK based department store Debenhams are to be shut down across the UK which is likely to also result in a total of 5000 job losses. This number of stores is almost one third of the total number of stores of the UK-wide chain.
The firms has also announced an almost £500m annual loss because of a write down of the value of its brand, lease costs towards some of its unnecessary shops and IT systems.
The recent years have been a struggle for Debenhams because it has been unable to adjust to a change in consumer trends of online shopping and their move away from going to the physical stores and the traditional high street. Additionally, consumers are also reportedly spending more on leisure activities instead of going to the high street for fashion shopping. Internet shopping currently accounts for almost a quarter of all spending on fashion purchases. The chain currently has a total of 165 stores with 27,000 employees.
The company said that the closure program would be completed over a time period of three to five years, and acknowledged that it is likely that unprofitability will cripple more number of its stores than it had announced earlier as the company needed to stop unwanted expenses in the face to rising increasing costs of operations and severe competition. Last year, the fashion retailing chain had announced the closure of 20 of its stores of which two have been shut down already.
A pretax loss in the year to 1 September of £491.5mfrom a £59m profit a year before was announced the company because of a one time hit of £524.7m, arising out of a write off of its brand value, lease costs of its unwanted store and IT systems.
Sergio Bucher, the chief executive, said: “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.”
He said the company was “taking tough decisions on stores where financial performance is likely to deteriorate over time” and working with its new finance director to get “rigorous cost discipline.”
Over the next year, the capital expenditure of the company will be reduced by 50 per cent from this year’s value to £70m as the company shifts its focus to invest in up to 100 top outlets and for the creation of a new “low cost approach” for 20 other stores.
This year so far, three profit warnings have already been given by the 240-year-old retailer. And in an effort to augment its finances, the company is also attempting to sell its assets which include its Danish chain Magsun du Nord.
In the last one year, there has been a drop of 75 per cent of its share value. This has resulted in a depreciation of the value for its entire business at just £105m because of fears apprehension among investors that the chain would suffer the same fate as that of he rival House of Fraser which went into administration.
(Adapted from TtheGuardian.com)