The British high street will look quite different after COVID-19 has passed. Already, staples such as TM Lewin, Oasis and (probably) Laura Ashley have disappeared in their physical forms.
Could Debenhams join them? The department store chain is in light-touch administration, has already announced 6,500 redundancies - a third of its workforce - and the prognosis doesn’t look good.
It would be a mistake to blame this situation entirely on the COVID-19 lockdown and recession, at least not yet. Debenhams was clearly struggling before the lockdown, its last few years dominated by record losses, refinancing, store closures, stock delisting and a peculiar feud with Sports Direct’s Mike Ashley, who played the role of activist investor in orchestrating the exit of chair Ian Cheshire.
The problem was a fundamental one: sales had been falling due to changing customer behaviour, but costs hadn’t. It’s been a challenge for all traditional retailers to some extent: if you weren’t already in the business of department stores, you just wouldn’t enter it now.
The question is what it could have done differently. In 2016, Debenhams hired a CEO from Amazon’s fashion division, Sergio Bucher, who identified two major areas where the company was significantly behind the curve - online retail and experiential shopping in its physical stores.
His solution, Debenhams Redesigned, involved closing less profitable stores in order to invest in those two priority areas, and working to improve the culture and processes in the business to make it faster moving, more innovative and more customer-centric.
On paper, it sounds like the textbook 21st century prescription for a failing bricks-and-mortar retailer.
If you accept that it was the right strategy (and not everyone will - some will have favoured a radical change in direction, akin to what Mike Ashley has done with House of Fraser), then its apparent failure even before COVID-19 can only really be because of two things:
1) It didn’t go far enough, fast enough - i.e. the chosen direction was right but the chosen velocity wasn’t
2) It was already too late
There’s something in the latter. From late 2017 at least, the stock was in freefall, losing 80 per cent of its value within a year. Finding the capital to make big investments at the same time as paying restructuring costs will have been extraordinarily difficult in that context, as would revitalising the culture - there's nothing like terminal decline to dampen the spirits.
Of course, this may be a premature obituary. If COVID-19 passes from our lives swiftly and without too much further trouble, then Debenhams could avoid the October cliff edge, when the furlough scheme ends, and live to fight another day. But the chain’s fundamental problem will remain.
The simple lesson, if there is one, is that you need to act on major strategic changes before crisis hits. Sadly for high street stalwarts like Debenhams, foresight will always be far harder to come by than hindsight.
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