- Debenhams requests discount of 1% to 2% on its bills from suppliers
- Retailer plans to instead pay suppliers earlier than their current terms specify
- Comes two years after it sent a similar letter to suppliers eight days before Christmas
Debenhams has requested a discount on its bills from suppliers in the run-up to Christmas for the second time in three years.
The department store chain has contacted suppliers asking for a reduction of between 1% and 2% on its payments in exchange for paying them 30 or 60 days earlier than their current terms specify, according to reports.
Debenhams said the scheme was “entirely optional” and had been welcomed by its suppliers after some requested the earlier payments.
It comes just two years after Debenhams forced some of its suppliers to cut prices by more than 2% eight days before Christmas, in a move that was dubbed the ‘Santa tax’.
In this month’s letter to suppliers, seen by The Sunday Telegraph, Debenhams said the window for shorter payment terms will last between November 24 and May 26, 2016.
The letter is reported to tell suppliers: “The working capital benefits associated with early payment are subject to suppliers agreeing an additional discount on the value of the associated invoices.”
A Debenhams spokeswoman said: “In response to requests from some of our suppliers we have this year offered earlier settlement of invoices in return for a small discount.
”The scheme is entirely optional as was made clear in our communication to our suppliers, and is intended to help their cashflow at peak periods.
”The offer has been welcomed and we continue to maintain strong relationships with our suppliers.”
Other retailers including Tesco are changing their supplier terms to pay them quicker. The grocer’s boss, Dave Lewis, has agreed to pay its smallest suppliers within 14 days instead of 45 – well below the food industry standard of 28 days.
The Government’s Prompt Payment Code currently promotes a 30-day period as standard, with a 60-day maximum limit. The ruling Tory party also wants to force big businesses to reveal their standard payment terms and the average time taken to pay their bills. The changes could come into force from next April.
Debenhams’ previous letter to suppliers came during a tumultuous trading period in 2013. The retailer’s finance director, Simon Herrick, was blamed for the letter and later parted ways with the business.
The latest letter comes a month after Debenhams boss Michael Sharp revealed he was stepping down from the department store chain after five years at the helm.
Despite shareholder unrest and reports that City stockbroking firm Cenkos Securities was attempting to spark an investor rebellion, Debenhams pre-tax profits increased 7.3% to £113.5m in the year to August 29.