Fenwick has suffered a slump in full-year profits as markdowns and investments in its digital capabilities dented its bottom line.

The department store business said pre-tax profit dropped 31.2% to £30.4m in the year ending January 27.

In figures to be filled at Companies House next month, Fenwick said operating profit fell at a similar rate of 29.6% to £17.8m during the 52-week period.

However, the business was “encouraged” that gross sales remained relatively flat at £426.3m, despite consumers’ “behavioural shift from product consumption to experience consumption”.

Gross profit margins slipped 0.7%.

The retailer, which drafted in former Co-op boss Richard Pennycook as chairman earlier this year, said in-store markdowns on certain product lines were required in order to “address overcapacity”.

The business also kick-started a number of investments in its IT systems and digital infrastructure during the year.

Fenwick said the strategy was designed to improve the “exchange and analysis of data” and to “modernise internal processes”.

Its capital expenditure hit £29.7m during the year, which included the opening of a new store in Colchester.

Online investment

Pennycook told Retail Week that Fenwick will invest a further £55m over the next three years, including £25m in technology.

The department store operator will launch a full online proposition for the first time in 2019, which will offer home deliveries and click and collect.

All orders will initially be fulfilled from its Kingston store.

The online platform will be run by former Dune ecommerce director Kate Smyth, who joined Fenwick as multichannel director in May.

Fenwick plans to plough a further £30m into its flagship location in Newcastle to refresh the store and breathe new life into its proposition.

Pennycook said: “There’s going to be a lot more of the experiential elements that we are seeing in the department store sector.

“Fitness will go in there, a spa, men’s grooming, as well as more traditional retail – there will be a new shoe hall refurbished and relaunched, restaurants. All of that will happen by 2021 and start in 2018.”

The retailer has also set up a new ‘family business committee’, which will comprise of seven members of the Fenwick family, ahead of the appointment of a new chief executive.

Pennycook said: “This is a forum where shareholders will be able to be involved in the overall strategic direction of the company.

“It will be a great new forum which reflects the fact that the family is broadening out. Although you can run a family business committee of seven people very effectively, were we to have all of them on the board it would be a bit unwieldy.

“There will still be family board members, but a very small number, and the family will decide amongst themselves who they are.”

Pennycook said that Fenwick’s search for a new chief executive and independent non-executive directors was ongoing and that an announcement would be made “in due course”.