Debenhams links up with Sports Direct and Costa to drive returns

Debenhams is to house Sports Direct and Costa in some of its stores as part of a trial that could lead to the arrival of a number of other leading brands.
Debenhams is to house Sports Direct and Costa in some of its stores as part of a trial that could lead to the arrival of a number of other leading brands.
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DEBENHAMS is to introduce Sports Direct and Costa outlets in some of its stores as part of a trial that could lead to the arrival of a number of other leading brands.

The department store chain is keen to drive better returns from its shops after admitting recently that 10 per cent of its UK space was under-performing.

The chain, which has 158 outlets in the UK​ including 16 in Yorkshire​, is battling to improve its fortunes after a disastrous Christmas performance led to a sharp fall in half-year profits.

Sports Direct will open two sports concessions in Debenhams stores during August and ​will ​potentially ​open ​more stores before the end of the year.

Coffee brand Costa will launch concessions in six stores ​over the next two months. Debenhams said it ​i​s in discussions with a number of other brands.

​Debenhams said that its outlook for the year is unchanged after underlying like-for-like sales rose 0.7 per cent in the 14 weeks to June 14.

​The figure excludes the impact of its summer sale, which is starting two weeks later than last year.​

Chief executive Michael Sharp said: “Whilst it is clear that consumers are aware of improvements in economic indicators, they are not yet seeing a significant improvement in their disposable income.”

Debenhams and Sports Direct, controlled by Newcastle United owner Mike Ashley, have held talks in recent months about how to work together.

This came after Sports Direct bought and sold a 4.6​ per cent​ stake in Debenhams worth around £46​m within a few days.

This was replaced by a complex financial arrangement giving Sports Direct the option to buy 6.6​ per cent​ of the department chain at a later date.

Debenhams has embarked on a strategy of ​reducing​ promotions and discounting after its Christmas offers flopped in the face of strong competition.

“Since the end of the January sale we have removed a number of events from the promotional calendar and reduced both the level of discount offered and stock participation in some other events​,” it said.​

The retailer’s decision to push back its summer sale has given it more time to achieve full price sales.

“This process will evolve over time and we will trial different approaches to ensure we achieve the right balance between improving our profitability and delivering great value for customers,” it said.​

The company is also working to improve its delivery options in time for Christmas, with next-day click and collect.

The new store pipeline stands at 12. The average size of these new stores is smaller than the current estate and the average lease length is shorter, with more than half at a lease length of 15 years or shorter.​​

Julie Palmer, partner at Begbies Traynor, said: “Although the ​g​roup is delaying the start of its summer sale by two weeks, this is unlikely to have a material impact on margins for the year as a whole. With intensive price pressures across the retail market today, I expect it will be some time before Debenhams has the confidence to fully commit to a more normalised pricing model in its stores.”