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Debenhams confirms job cuts as part of store restructure
Department store group Debenhams will cut a quarter of store management roles as accelerates its restructuring plans amid the highly challenging UK retail market.
Chief executive Sergio Bucher, who was poached from Amazon just over a year ago, last month warned that profits for 2018 would be lower than hoped due to tough festive trading and expectations of a likely continuation of the competitive and volatile retail market in the second half of the year.
The company said a shake-up of the store structure was planned as part of Bucher's 'Debenhams redesigned' strategy. A month ago he said an extra £10m of cost savings in 2018 could be made by bringing forward job cuts, management reorganisation and rates reviews.
"The review has identified significant cost savings by reducing the complexity of management roles in stores as well as processes to optimise and standardise ways of working," a spokesperson said on Thursday.
As a result, 320 store management positions are potentially "at risk of redundancy", with consultation already underway with individuals affected to try and redeploy them elsewhere in the business if possible.
"We envisage our new structure being fully in place by the end of March," Debenhams said.
Profit before tax for the year to September are projected to be £55-65m, the FTSE 250 company said last month, down from an underlying PBT of £95m last year. "The market dynamics we have seen have reinforced our view that we need to move even faster to implement the cultural and organisational changes needed to ensure Debenhams is in the best possible shape for today's fast-changing retail environment," Bucher said at the time.
Debenhams' troubles and its declining shares in recent years, which has seen its market cap shrink two thirds to under £360m over the last two years, has sparked renewed takeover talk in the City. Sports Direct, which owns 21% of Debenhams, is seen as one potential suitor.
There are also investor concerns for the group's dividend, which analysts have noted remains covered by earnings per share but is not covered by free cash flow.