AT the time it was seen as something to boast about. When Debenhams was heading for its return to the stock market last May, chairman John Lovering and chief executive Rob Templeman trumpeted that they had slashed the cost of investment in the company’s 123 department stores.

The two men - plus their long-standing ally Chris Woodhouse as finance director - had been in charge of the retail chain since the end of 2003 when it was bought by a private consortium embracing CVC, Texas Pacific and Merrill Lynch Global Private Equity.

A year ago Lovering and Templeman and their advisers Merrill Lynch and Citigroup claimed that Debenhams had seen “a considerable improvement in capital efficiency under current management, particularly in new store openings and refurbishments”.

The 272-page offer document said that they had reduced the sums spent on opening new stores from £178 per sq ft to £108. That was impressive enough. But what was really striking was the way they had slashed the money they spent on refurbishing existing retail space.

Before they took charge, Debenhams had been spending £30 a sq ft when an outlet was done up. But Lovering and Templeman had brought the figure down to just £7 - a cut of more than 75%. It sounded like a great achievement.

Now, less than a year later and after three profit warnings in quick succession, Debenhams is admitting that it has to spend more on its retail estate, large parts of which are looking dowdy and forlorn.

Now, Debenhams says it plans to lay out almost £150m on capital spending this year and next. That figure sounds like a bold commitment. But look a little closer, and the sums actually being spent on sprucing up Debenhams’ existing outlets are far more modest.

Of this year’s total, some £19m has already gone on an Irish acquisition, when the company bought nine stores from Roches. A further £72m has been earmarked for opening new outlets. Some £41m has been set aside for improvements in logistics — warehousing, distribution and so on.

The upshot is that only £17m or so will be left for actually refurbishing Debenhams’ existing estate.

Investors who bought into Debenhams last year are understandably feeling sore. Merrill and Citigroup had initially hoped the shares might be sold for as much as 250p each. In the end, the advisers had to settle for a price of 195p — the bottom of the range they had suggested — which gave Debenhams a value of £1.6 billion.

But following a profit warning last week, the shares dropped below 150p, leaving investors who subscribed to last year’s offer nursing losses of almost 25%.

There is no doubt that during the two-and-a-half years that Debenhams was in private-equity hands, Templeman and Lovering did all one would expect of seasoned venture capitalists.

They cut staff — and therefore costs. One in eight jobs in the company’s established stores went. They sold and leased back Debenhams’ freeholds, raising cash to repay debts incurred as part of the buyout. And they made suppliers wait longer to be paid: in 2003, Debenhams’ last year before being taken private, bills were settled after an average of 62 days; after two years under Lovering and Templeman, that had been stretched to 79 days.

To their credit, they also brought in more customers. In the last full financial year before flotation, underlying sales growth was 2.8%.

But that was not sustained. Last week’s figures showed that underlying sales in the half-year to the beginning of March were down 4.5%. And in the most recent six weeks, they were down 6.9% - a figure that has really alarmed investors.

Nearly a third of sales are accounted for by concessions operated by other retailers such as Jane Norman and Topshop; and judging by the performance of these businesses elsewhere in the high street, their turnover is holding up reasonably well. A further 20% or so of sales are in accessories, homeware and health and beauty, where sales have also been relatively robust. So much of the recent fall in Debenhams’ overall sales must be attributed to its own clothing ranges. They must have gone down far more steeply than the 6.9% reported for the business as a whole.

Templeman and Lovering each received many millions when, under private-equity ownership, the business was refinanced in 2005. And when it was floated, Lovering sold shares worth £5m and Templeman cashed in £8m worth.

Both men still have substantial stakes in the business and from next month, the first anniversary of the flotation, they will be free to sell out completely.

The recent collapse in Debenhams’ share price has prompted talk that the company might even go back into private hands. Baugur has been mentioned as a buyer and certainly, by the conventional measure of earnings, it looks cheap. Despite its current woes, Debenhams is expected to show underlying earnings per share of perhaps 15p in the 12 months to September next year.

But Debenhams is already highly-geared compared with most of its retail peers. By the measure favoured by venture capitalists - predepreciation operating profits compared with the total of debt and equity - the shares are actually more expensive than those of Marks & Spencer.

Debenhams may be in a hole. And its recent performance may have angered investors. But if they are expecting private equity to ride to their rescue, they may have a long wait.