A £25 million refurbishment of Debenhams’ flagship Oxford Street store has dented the company’s profits by £2 million as swathes of floors were shut, its busiest entrance blocked off and scaffolding surrounded the building for more than a year.
The disruption left the company with a pre-tax profit fall for the first time in five years, down 2.7% from £158 million to £154 million. The snow in January which kept shoppers away was blamed for the drop.
Despite the fall in profits, sales were up thanks to a strong boost from online, rising 46% to £366 million and leaving chief executive Michael Sharp confidently predicting internet sales will hit £600 million in three to five years.
Online now makes up 13.2% of Debenhams’ total sales, which rose 2.3% to £2.28 billion from £2.23 billion last year, with the UK up 1.9% to £1.9 billion, although sales in store fell.
However, Sharp remained cautious about the economic outlook and added his voice to an ever-growing list of retailers who have said signs of growth are not being felt by customers.
He said: “There are some positive economic indicators that we are pleased to see, but the reality is for customers it doesn’t feel like that yet. They are encouraged by what they read but it hasn’t made any difference to their disposable income.”
He joins the bosses of Tesco, Sainsbury’s and Asda who have argued that the recovery is not being felt by customers because inflation continues to grow faster than wages.
But his biggest headache has been the Oxford Street store, where around 10% of the floor space has been shut as the entire flooring has been relaid with heavy-duty tiles, the lights have been replaced and a new floor added.
Three new restaurants have opened and the outside of the building will be covered in metal tiles which flap in the wind.
A store opening programme remains on track, with Sharp revealing online sales doubled in the Chesterfield area once a new store was opened in the town.
