Warehousing and automation save Debenhams £12m

With pre-tax losses of £491.5 million in the year to 1 September, Debenhams has announced further warehouse consolidation and automation and a new supply chain review.

Debenhams was due to close 10 stores across the UK but this has now increased to 50, while the company is planning a lower-cost approach for a further 20 stores.

Last year the department store chain announced plans to close its Northampton distribution centre as well as regional warehousing. It is also going through an automation programme. These changes are part of a cost saving plan that the firm claimed made £12 million in savings this year. It identified £30m more savings for next year annualised to nearly £50m by 2020.

In a statement the company said, “Key elements of these savings include: further review of support centre overhead; further warehouse consolidation and automation; a further review of central costs following the implementation of the new operating model; and an end-to-end structural review of the business, including the efficiency of the supply chain.

“We are reducing planned capex to c.£70m, with future investment focused on priority, faster-returning projects under our Debenhams Redesigned strategy.”

Group sales were down 1.8 per cent to £2.9 billion last year, while underlying pre-tax profit was down 65 per cent at £33m. Exceptional items totalled £524.7m. These included £13.6m for the Debenhams Redesigned transformation programme; warehouse closure costs of £2m plus £9m in transition costs; asset write-offs of more than £80m; exceptional store costs of £117.5m and goodwill impairment of £302.1m.

Chief executive Sergio Bucher 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. Working with our new CFO Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline and to prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time.”