Two iconic British department store brands released their annual trading figures overnight – and the contrast was blinding.
Debenhams underwhelmed with like-for-like figures showing a decline in sales of 1.1 per cent, ts growth driven purely by the addition of five new stores and online advances.
Yet Selfridges’ “winning formula” delivered another year of robust sales growth, in the words of Verdict Retail lead analyst Honor Strachan.
“Its ability to bring on board the right mix of brands, tailor each of its stores to the local audience and create an ever-changing in-store shopping experience has ensured Selfridges remains relevant and an exciting destination among an increasingly demanding shopper base,” said Strachan.
His colleague Kate Ormrod, a senior analyst, was less complimentary about Debenhams, describing the company’s UK gross transactional value of £2.352 billion as “underwhelming”.
“Debenhams is slightly in limbo at present while new CEO Sergio Bucher familiarises himself with the company and forms his strategy to revitalise the business. Focus on clothing and homewares is much needed in FY2016/17, as well as ensuring the instore experience is consistent across its UK store portfolio.”
Ormrod said Debenhams’ online business remains a key asset, and now represents 14.7 per cent of group sales – aided by its focus on mobile, its click & collect service, and investment in IT and systems, which bode well for the Christmas peak.
“Refocusing the business away from clothing has been successful with solid growth achieved in beauty, gifting and accessories. While trading in the overall clothing market has been volatile, Debenhams must review and refresh its ranges to maintain its appeal and relevance in the market – or face further market share erosion. Selected Designers at Debenhams sub-brands such as Star by Julien Macdonald and J by Jasper Conran feel dated, along with core ranges such as Red Herring and Mantaray. Though Debenhams appears hesitant to rectify its problems in clothing, there is opportunity to target mature shoppers and better compete with the likes of JD Williams,” she said.
“Debenhams’ strength lies in beauty and the addition of cult brands such as Kat Von D ensure the retailer garners destination appeal both instore and online. Driving cross-sector spending is essential to turn younger beauty shoppers into core Debenhams customers. Plans to introduce lighting to 30 stores, a clear attempt to muscle in on area BHS excelled in, and introduce furniture hubs in eight branches are positive steps, though Debenhams’ overall homewares offer pales in comparison to rival John Lewis in terms of breadth and destination appeal.
Selfridges deflects the pressure
Strachan paid tribute to Selfridges’ ability to prosper while facing “immense pressure from sector specialists and online pureplays”. Gross transactional value rising 5 per cent to £1.4 billion.
A £300 million commitment to refurbishing its Oxford St, London, flagship dented its operating profit, which slipped marginally to £152 million, trimming margins to drop one percentage point to 10.9 per cent.
“The modernisation of its flagship London store, taking over two years and due to be completed in spring 2018, is central to Selfridges’ strategy in creating destination departments, such as its 2016 openings of the Body Studio and Designer Studio, off the back of its success of its Denim Studio (2013) and Shoe Galleries (2010),” said Strachan.
“The accessories department is currently being overhauled with the first phase due to open in time for peak Christmas trading, and will undoubtedly benefit from the influx of tourists taking advantage of the weak pound.”
He said with Selfridges’ proposition heavily skewed to the luxury end of the market, he expects Selfridges to have a very strong second half in 2016/17, resulting in full year growth exceeding its 2015/16 financial year and an increase in its UK department store market share.
“Selfridges continues to raise the bar by surprising its shoppers – with brand launches including Missguided for example – which is key as we approach a period of more considered spending among domestic consumers.”
