It is easy to mock retail chief executives who talk about embarking on “a journey” but at least Debenhams’ journey to cut back on promotions has a direction and a target.

It is easy to mock retail chief executives who talk about embarking on “a journey” but at least Debenhams’ journey to cut back on promotions has a direction and a target.

Having long criticised Debenhams’ dependence on discounting, it is good to see that since Christmasmas Debenhams has been setting out to reduce and refocus promotional activity.

Boss Michael Sharp described this process as “a journey”, a phrase that is usually cringe-making and one that is much used by Marks & Spencer chief Marc Bolland to describe the laboured attempts by M&S to improve its womenswear range and online capability.

However, Mike Sharp had the good grace to apologise on the analysts conference call for using the phrase and embellished it by saying that it is “a journey North” and that, in terms of reducing the amount of promotional activity, “we want to go at a pace we can manage, not 100% with our pants on fire”.

It is early days for less discounting at Debenhams and it may take three years to get the balance right between full-price sell-through and like-for-like sales, but since January Debenhams has cut back the number of events and reduced the level of discounts and the amount of stock in each promotion.

The result is that full-price sales are growing by “double-digits” (albeit off a low base) and gross margins in the second half should be slightly up.

The impact of big Sales and Debenhams’ reliance on them to boost like-for-likes sales can be shown by the fact that for the 15 weeks to June 14 like-for-like sales were, much as expected, down by 1%.

But, as the last three days of last week were affected by the deliberate delay in the Summer Sale, Debenhams points to the underlying 0.7% like-for-like sales increase for the 14 weeks to June 7.

The fact that Debenhams felt comfortable with holding the start of the Summer Sale back from June 12 to June 26 shows that stocks are in good shape, albeit the John Lewis Sale on June 26 is a week later than last year.  

Debenhams is also trying to reduce the amount of discounting online albeit, online retailing is inherently (even) more promotional than store-based retailing because promotions are used as a key customer acquisition tool.

Group online sales increased by 10% during the 14 weeks to June 7, representing 15.2% of the total.

That is slower growth than it has been seeing (and slower than the 28% online growth run-rate at John Lewis) but online profitability is much improved because of fewer stock clearance promotions.

Needless to say, without online growth like-for-likes would be negative, but that is true of most department store groups (with the exception of John Lewis, thanks to its awesome electricals growth).

In the 14 weeks to June 7th UK Store LFL sales were nearly 2% down at Debenhams, but at least that is not as bad as it was before Christmmas, helped by the success of the Oxford Street store revamp and, if truth be told, more helpful spring weather.   

The other “journey” that Debenhams is on is to use the 1m sq ft of surplus space it has identified in stores, so there is much interest in the news that Sports Direct is opening two concessions in Debenhams’ Harrow and Southsea stores in August.

The stores are two of Debenhams’ 40 largest, which account for about 80% of that surplus space. Sports Direct is taking the whole of the top floor in Southsea (19,000 sq ft) and 13,000 sq ft of the top floor in Harrow.

Whether enough customers will find their way up to the top floor of Harrow and Southsea remains to be seen and whether Sports Direct’s active promotional stance is compatible with the ‘new Debenhams’ approach to discounting remains to be seen.

But market research shows that Debenhams’ customers want it to sell more sportswear, so Debenhams didn’t have much choice than to sit down and discuss concession terms with Mike Ashley.

  • Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos Retail Think-Tank.