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Debenhams CEO Michael Sharp steps down as sales and profits rise – the analysis

Debenhams 2015 campaign

What’s a news editor to do? Just when you think you’ve got your top story all wrapped up (Debenhams sales and profits rising), its CEO Michael Sharp announces that he’s quitting and you have to start all over again.

So what’s the announcement all about? Basically, Sharp will next year step down from the role he’s held since September 2011. As media speculation reached fever pitch about the company’s biggest shareholders being unhappy with his performance, he stressed in a statement that he had always intended to remain in the post for only five years.

“I hope being transparent about my intentions will stop recent speculation becoming a distraction, allowing me and the Debenhams team to focus on delivering our strategy and the important Christmas trading period,” he said. He’ll also be around to help find a suitable successor.

Will he go with his head held high? It looks that way. Despite some struggles in recent years, the latest set of full-year results certainly looks respectable. The company obviously still has work to do but the strategies it has put in place in recent years look like they’re starting to pay off.

Cost controls helped Debenhams achieve a 4.34% rise in operating profit to £134.1m for the year to August 29 with pre-tax profit rising 7.3% to £113.5m.

Comp sales across the company’s businesses rose 2.1% in constant currencies or 0.6% reported, as currency exchange issues continued to wreak the havoc for retailers as they have for some time.

The company’s gross sales rose 1.3% to £2.86bn globally, and in the UK they were up 2.1% to £2.32bn. After adjusting for concessions, consignments and staff discounts sales rose only 0.4% to £2.32bn globally and 1.1% in the UK to £1.92bn.

Online sales grew a healthy 11.4% and now make up 13.6% of the firm’s total with the all-important m-commerce making up 40% of online sales.

OK those are the very dry numbers. But what was behind all that? Debenhams said it had good news with own-brand full price sell-through increasing by 7%. Also important has been its successful space optimisation trials that are now being rolled out further. Essentially, the company has been speaking to customers about what they want to buy and identifying the most efficient use of space to give them more of it. Debenhams said that 35% of its targeted space is now filled with new brands, formats and services and 50% will be filled by April next year.

Any other good news? Plenty. It saw its strongest-ever brand launch with Nine by Savannah Miller now in 65 stores and its international ops are progressing. It’s entering the Australian market with Pepkor SE Asia, a subsidiary of the Steinhoff Group, and has a new distribution arrangement for selected Debenhams brands with VinGroup of Vietnam.

Debenhams plans to grow its international business to around a third of its total and currently has 70 franchised stores. Its non-franchised stores comprise six Magasin du Nord locations in Denmark and 11 Debenhams stores in the Republic of Ireland. Magasin du Nord comps in constant currencies grew by 8.1% in the year, outperforming the Danish market.

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