Debenhams will restart its store refurbishment programme a year after it battened down the hatches amid the financial crisis.
In the latest sign that retailers are beginning to feel more certain about the economic outlook, the department store group said that it would begin investing in improving its stores again now that sales had stabilised.
It postponed the programme as sales plummeted last year, prompting criticism that the group was struggling under the debt mountain it was bequeathed by its former owners, CVC and TPG, the private equity groups.
Rob Templeman, chief executive, said that the investment would begin tentatively at first. He said: “At our peak we were doing, [up to] 20 a year. I don’t think I would go back to that level, but if you asked me to guess I would say half a dozen a year.”
Mr Templeman added that the stores would be competing with some of Debenhams’ own-label brands for capital expenditure. “Red Herring, Jeff Banks and John Rocha will all be getting a makeover this year, so there’s quite a lot of investment elsewhere,” he said.
He denied that the refurbishment programme was mothballed because of Debenhams’ debt pile, which had been whittled down this year from £994 million to £590 million with the help of a fundraising.
“The reason we stopped wasn’t a capital constraint. It was because we were seeing massive volatility in sales. It would have had a considerable impact on sales,” Mr Templeman said.
Sales at Debenhams fell 3.6 per cent on a like-for-like basis in the year to August 29, with total sales flat at £2.3 billion. The decline in sales was a result of devoting more space to ownlabel ranges, particularly the Designers at Debenhams lines.
The retailer, which has 144 department stores and ten smaller Desire by Debenhams stores, this year scrapped its dividend, which was 3p last year.
Lower sales volumes were more than offset by the improved profit margins available on exclusive ranges, including Butterfly by Matthew Williamson and H! by Henry Holland.
About 76 per cent of sales are now own-label, with Debenhams aiming for 80 per cent in the next two years.
Yesterday, the company announced that it was resurrecting the Principles brand, which it said would have a “designer twist”, after it bought it from Principles’ administrators this year.
The refurbishment of stores could be stepped up if trading improves. “We want to see what Christmas trading is like. We have got the financial capital to accelerate, but you do see disruption on sales as you do them,” said Mr Templeman.
The company expects customers to make another last-minute dash to the shops this Christmas. Festive trading has been getting later in recent years, analysts have said, driven partly by expectations of last-minute discounts from nervous retailers.
Mr Templeman said that, despite signs that shoppers were regaining their confidence, there would be no quick bounce back to pre-recession spending. “There are lots of reasons why consumers are in a better place. Equally, there are a lot of negative factors, not least VAT and fear of unemployment. Christmas will, I think, come late. I think that it will be competitive and promotional, and we will probably be in the heart of that — with planned promotions. I’m more in the positive camp than the negative camp, but it will be a tough old year.”
He added that falling property prices would help retailers to respond if there was a sharp economic recovery. “We have a low-cost environment that we haven’t seen for many, many years. If the economy does turn on a sixpence, we will see quite good momentum in retail,” he said.
Debenhams confirmed yesterday that John Lovering, its chairman, would step down in March. Mr Lovering was part of the management team that ran Debenhams under CVC and TPG, and helped to float it in 2006.
Shares in the company, which are up 224 per cent since the start of the year, fell 0.65p to close at 82.45p.
Source: business.timesonline.co.uk
