Department store wars: How Debenhams stacks up to John Lewis and House of Fraser

Pre-tax profit slumped 44% following a hike in exceptional costs as his digitally-led strategy gets underway.

But a comparison with the sector’s other two key players shows Debenhams’ vulnerability and how vital it is that Bucher’s plan succeeds.

Gross sales

While Debenhams has more than three times as many UK stores as John Lewis, gross sales (including concessions) were half of those achieved by the sector leader in 2016/17.

Having been “broadly flat” at £2.35bn over the year to September 2017, Debenhams has added less than £100m to its gross sales levels in its domestic market over the past five years – only around 4%.

John Lewis has raised gross sales by more than 25% over the same period and even the beleaguered House of Fraser has seen growth of nearly 14%.

Profits and margins

Margins have been coming under pressure across the department store sector pretty much without exception as the key players invest heavily in multichannel and improving the in-store experience.

John Lewis has been at the top of the pack in terms of profits, too.

The decline in margins at the sector leader over the past couple of years reflects major investment in overhauling its Magna Park distribution facilities.

And this has been paying off in improving margins from the second half of 2016/17 according to management.

House of Fraser’s woes are well-charted, but the retailer eventually returned to the black at the pre-tax level in 2016/17 – although margins remain decidedly low.

Debenhams had been working hard to improve margins by refocusing its promotional strategy to reduce the number of sales events it holds.

But margins had started to be impacted from the increased focus on lower margin non-clothing categories from 2015/16 as it strives to reduce its dependence on the increasingly competitive clothing sector.

This continued to impact the business in 2016/17, with soaring exceptional costs adding to the pressures and reducing margins by nearly two full points to just 2.5%.

Online

John Lewis figures are estimates based on gross online sales figures. House of Fraser figures for 2012/13 and 2013/14 are estimates.

Debenhams remains well behind its rivals when it comes to online penetration. But the group has been investing heavily in fulfilment over the past few years in a bid to catch up.

Debenhams’ online sales grew 12.7% in 2016/17 to account for 16.2% of overall gross sales, but the retailer wants to raise this proportion to around 30% in the longer term.

John Lewis hit that level three years ago and last year generated a massive 42% of sales online, showing how its £500m investment into the online channel over the three years to 2018 is paying off.

Online provided a bright spot in House of Fraser’s challenging 2016/17 financial year too, with ecommerce sales rising 16% to account for 22.1% of total sales.

Sales densities

Sales per square foot have adopted a generally downward curve across the three main department store groups over the past few years as the proportion of sales generated online continues to increase.

Not surprisingly, given its elevated online sales levels, John Lewis has suffered the biggest decline, with sales per sq ft falling by just over £100 in the past five years.

At an estimated £420 per sq ft in 2016/17, John Lewis still significantly outperforms its rivals though.

All three players are investing in the fabric of their stores and in-store experiences to drive footfall and stem the decline in densities.

A space-optimisation programme put in place by previous management from 2014/15 has helped moderate the decline at Debenhams, although in more favourable conditions the retailer might have been expecting to see renewed growth in sales densities by now.