Debenhams was able to paint a positive picture at its half-year financials last week as profits and like-for-likes rose.
The numbers came off the back of a strong Christmas performance, which took observers by surprise. Although Debenhams attributed some of its profit improvement to good financial management, which allowed it to access lower interest rates, much resulted from better trading.
Key to that is the departing boss Michael Sharp’s vision of a “diversified” department store chain. Debenhams management see its traditional reliance on women’s clothing, and occasionwear in particular, as too heavy.
In addition to being the market leader in women’s occasionwear, Debenhams has a 5% market share in men’s and women’s clothing, and a 3.5% share in children’s clothing. But in a tumultuous and competitive apparel market, it makes sense to have other strings to its bow.
New chairman Sir Ian Cheshire said last week that Debenhams is “much more diverse than people think. It is a much more rounded business model than perhaps the perception of it [reflects].”
“Debenhams is much more diverse than people think. It is a much more rounded business model”
Sir Ian Cheshire, Debenhams
Debenhams revealed that its clothing sales accounted for 45% of its sales over the half year. Its Christmas sales mix mirrored that figure exactly while during Christmas 2014, that figure stood at 47%.
Verdict Retail consultant Rebecca Marks believes Debenhams would be wise to lessen its clothing sales to 40%. “They are quite high at nearly half,” she says. “Bad clothing sales could still be very detrimental to them.”
John Lewis, unsurprisingly, leads the pack when it comes to diversification, as it does with much else. A strong homewares and technology offering means only about one third of sales come from clothing, according to a John Lewis spokeswoman.
At House of Fraser, about 47% of its sales come from clothing.
A change in category
So what categories is Debenhams focusing on as it seeks to be less dependent on fashion? Beauty and gifts are two categories that it has devoted attention to and the former is especially important.
The retailer maintains it is the market leader in luxury beauty and trading director Suzanne Harlow aims to build upon that by “turbo charging” beauty services such as brow and nail bars.
Many department stores offer beauty services in store, and that alone will not differentiate Debenhams. But Harlow wants to create a unified offer that she is convinced will distinguish Debenhams from rivals.
At present, services are provided by brands alongside their product concessions.
“We can reach so many customers,” Harlow said. “Rather than have it be about one particular brand, as it is now, we would like to pull it together and curate it under a Debenhams banner.
“I do see an opportunity but the route to market is yet to be determined.”
Such services and products enable Debenhams to extend its appeal. Harlow says: “Makeup continues to grow for us – it attracts a higher frequency and a younger shopper.”
That would allow Debenhams more effectively to take on competitors. John Lewis, for instance, has one John Lewis-branded beauty services area, in its new Birmingham store. If Debenhams can work out its route to market and roll out its strategy, it could be crucial in drawing in shoppers, including young customers.
At your leisure
Another key plank in Debenhams’ diversification strategy is its space optimisation programme. Lower sales density areas are being converted to better performing eateries with restaurant and cafe partners such as Costa Coffee, Joe & the Juice and Ed’s Easy Diner.
“The eating out market is worth £83.5bn,” said Sharp. “The womenswear market is around £20bn. So it is four times the size and it is growing 10 times faster.
“Those customers that eat with us spend up to 40% more”
Michael Sharp, Debenhams’ departing boss
“Currently, 3% of our sales are from food, we think we can get it to 10%.”
The other benefit of having food partners is that they – along with beauty services – fit well with a rise in demand for leisure experiences.
Sharp flagged that consumer trend – also recently highlighted by by Next boss Lord Wolfson – and pointed out that Debenhams felt the benefit of that trend because “those customers that eat with us spend up to 40% more”.
That younger shopper keen on beauty products and services is also keen on the branded restaurant offering. While Debenhams has cafes in every store, targeted at an older demographic, management points out an explicit age split between the cafes and the newer branded eateries, which continue to grow in number.
If Debenhams can successfully chase that prized younger demographic by extending its offer while hanging on to its traditional shoppers it may, to paraphrase its tagline, make life more fabulous for itself as well as consumers.
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