Debenhams finance boss quits after profits warning

Debenhams finance boss Simon Herrick has resigned just days after the department store chain's shock profits warning following disappointing Christmas trading.
Debenhams finance boss Simon Herrick has resigned just days after the department store chain's shock profits warning following disappointing Christmas trading.
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Debenhams finance boss Simon Herrick has stepped down two days after the department store chain issued a shock profits warning following disappointing Christmas trading.

Mr Herrick has stepped down from his post as chief financial officer with immediate effect, but will not leave the company formally until February 7.

There was no reason given for his departure, but the move comes after Debenhams warned on Tuesday that profits were expected to fall by as much as 26 per cent due to its failure to entice a rush of shoppers in the days leading up to Christmas.

It also follows reports last week that Mr Herrick’s position at the group was under pressure amid shareholder concern over his performance.

He has been criticised over a so-called “Santa tax” letter hitting suppliers with demands for discounts days before Christmas.

Investors are also said to have been angered by guidance provided to analysts this year, with the City caught off guard by an earlier profits warning in March and unexpected costs revealed when full-year results were announced in October.

Debenhams said it had begun a search to find Mr Herrick’s replacement, with finance director Neil Kennedy taking on the role on an interim basis.

Mr Herrick will continue to be paid salary and benefits worth nearly £490,000 over a 12-month notice period, with up to £12,000 on top to cover legal fees.

Analyst Caroline Gulliver at Jefferies said: “The cost of the promo strategy at Debenhams has again overshadowed the group’s progress on various online initiatives, leading to the resignation of the CFO... We need more convincing that Debenhams can manage the cost impact of the transition to an integrated multi-channel offer, hence our ‘Hold’.

“We expect the pressures on real UK household disposable income to ease in 2014, bringing some relief to retailers. We also expect multi-channel spending to accelerate. Debenhams’ challenge is how to simultaneously manage five per cent store footfall declines and improve the economics of delivery/click & collect.”

Debenhams, which has 11 stores in Yorkshire, said earlier this week that half-year pre-tax profits were expected to fall to around £85m from £114.7m the year before, after discounting ate into a modest 0.1 per cent like-for-like sales increase for the 17 weeks to December 28.

The hoped-for sales surge in the last week before Christmas failed to materialise and the group said it would have to resort to more discounting in January and February to clear stock.

It was the group’s second profits warning in less than a year, with poor trading at the start of 2013 seeing profits fall 2.7 per cent to £154m for the 12 months to August 31.

Debenhams chief executive Michael Sharp insisted on Tuesday the chain was battling against an “extremely difficult environment” that led many retailers to slash prices in the festive run up.

The group also blamed bad weather for having an impact on clothing sales, which fell over the 17-week period.

Mr Herrick’s departure comes after just two years in the role.

Mr Sharp said: “On behalf of the board, I would like to thank Simon for his hard work and contribution over the past two years. We wish him well in the future.”

Debenhams’ trading update earlier this week sparked market jitters over the rest of the retail sector, prompting a sell-off among a clutch of other big-name brands.

The group said: “We did not experience the anticipated final surge in sales in the last week of the period and as a result we expect the need for additional markdown to clear stock in January and February.”

Debenhams said retailers embarked on an unprecedented level of promotional activity over the period as they fought over a declining number of high street customers amid continued pressure on household incomes.