The changing face of retailing business in the United Kingdom was drastically portrayed after it was revealed that the market value of one of the most well known names of UK retailing industry and the British high street, Debenhams – which has 165 UK stores and sales of £2.9bn, is lower than the market value of a fishing tackle chain that has only 24-stores.
There was a drop of 5 per cent in the shares of the company on Friday after this data was revealed at 3.8p which is a new low for the company. At this share price, the market value of the company comes to about £46.6m which is about £8m less than Angling Direct – which is the fastest growing fishing specialist and was established 14 years ago with annual sale of about £30m.
In comparison, the history of establishment of Debenhams can be traced back to 1778 and was once one of the constituent of the FTSE 100 index which comprises the largest companies in the UK. Debenhams was first dropped to the FTSE 250 index because of decline in value and thus tear it was even dropped form that index. Its value now is less than a range of retailers including Superdry, Halfords and Carpetright which is a floor coverings specialist that was forced to close down 92 stores earlier this year through an insolvency procedure.
So far this year, there has been a 90 per cent drop in the value of the shares of the company after three profit warnings primarily because the company has not been able to change and adapt according to the change in the retailing industry and shopping habits of the consumers and increased competition. The company now has a debt of more than £300m.
A number of online rivals which includes the likes of beauty specialists Cult Beauty and Feelunique and online e-commerce platforms such as Amazon and Asos is threatening the very existence of department stores which were once the preferred choice of shoppers fro everything branded – from clothing to electrical goods to beauty products.
Shutting down of about one third of its UK stores – 50, was announced by Debenhams in October when the retailer also reported a near £500m loss.
The department store and other big retail brands faced being “smashed to pieces” by a savage high street downturn this Christmas, said Mike Ashley, the head of the House of Fraser owner Sports Direct last week. That firm is believed to be ready to acquire Debenhams of the financial position of the retailer gets worse.
In sharp contrast, specialists firms like Angling Direct which operate with a limited number of small stores, possess a strong presence online and has very strong engagement with well-defined customer bases, are believed to the most probable future of the retailing industry.
“Those retailers that will be successful will not have massive stores with long leases and are relevant to their customer. They are absolutely focused on putting the customer first,” says John Stevenson, a retail analyst at City brokers Peel Hunt.
Enhanced competition from online retailers, low consumer confidence and unseasonably warm weather would be the reasons for Debenhams likely missing its profit targets, he said.
“Even if it gets through Christmas and comes out the other side OK, the outlook is one of the most challenged retailers in the market,” he said.
(Adapted from TheGuardian.com)