ROB TEMPLEMAN arguably has one of the least enviable jobs on the high street.
The Debenhams boss has seen shares in the department-store chain more than
halve in value since it refloated 18 months ago after two-and-a-half years
in private-equity ownership.
Three profit warnings in quick succession immediately dented City confidence
and barely a week has gone by in the past year without whispers of
shareholder discontent, financial problems or possible management changes.
City critics say the chain is overburdened with debt, has failed to spend
enough on its stores and regular discounting has damaged the brand.
But now, in an exclusive interview, Templeman hits back at his doubters,
insisting that the accusations are unfounded and the chain is doing all the
right things to end up in the “winning camp”.
Speaking last week at a recently refurbished store in Uxbridge, west London,
he was in fighting form. The 50-year-old rugby fan said despite recent
setbacks Debenhams had still made big strides under his stewardship.
He pointed out that sales had soared by £500m; margins had improved, market
share had risen 3.5%; the chain had opened 26 new department stores; created
thousands of new jobs and embarked on the biggest refurbishment programme in
its history. Not bad for a company supposedly in crisis.
Templeman said that changes made at the Uxbridge store encapsulated what was
going on at Debenhams stores around the country. It is six months since the
seven-year-old store was revamped at a cost of just £9 per sq ft – a
fraction of the estimated £35 to £80 spent by rivals.
The results are nevertheless stunning – the store has glamour and pizzazz once
again. The drab white internal walls have been replaced in part by glittery
silver to show off the most upmarket clothing collections. And there are
more than 450 mannequins scattered round (seven times as many as before),
all dressed in fabulous outfits to inspire customers.
Good retailing tricks have been utilised – hats and scarves and bags sit next
to coats and trousers so customers spend more by picking up an accessory to
match a new outfit.
Costs on the refit have been kept to a minimum by cutting out unnecessary
expenditure. The ceilings and floors have been retained and instead of
buying entire clothing stands – at £60 each – just the £1 metal arms have
been replaced with new ones that allow the retailer to display a wider range
of clothes because they hang at different heights.
Templeman said the investment at Uxbridge would generate a 55% return on
capital.
“I think the tide is turning about how much we have spent on refurbishing
stores. Instead of asking why we have spent so little, analysts are starting
to turn to other people and ask why they’re spending so much,” he said.
“It’s a fallacy that we haven’t invested in our store. People get too caught
up in the capital, pound-note investment. What’s important is the return on
capital and the customer reaction.”
Wandering round the shop there is little sign of big discounting and Templeman
rejects accusations that the retailer is holding more sales than ever before.
“We’ve been doing our mega-day sales for over 18 years – we have always had
two or three each year. The difference is that when we do them now we put
more concentration into them. The single biggest change is that we make more
noise about them.”
He concedes, though, that perhaps Debenhams has given the appearance of
holding more sales because since taking the helm he has cleared all surplus
stock at the end of each season. In the past, if swimsuits failed to sell in
the summer they would wind up in the store cupboard until the January sales.
But Templeman said that selling products out of season inevitably required a
bigger discount. “If the weather isn’t right or something isn’t selling
after a few weeks we will now discount it to clear it, so there is some
credence to the criticism about sales,” he said.
Looking forward he said that a whizzy new handheld computerised price-cutting
gadget will allow the group to change prices in a more subtle way without
having to take the red-pen to labels.
This means store staff can now scan price labels and tell whether the price is
about to be changed and when. The device also allows them to print out a
sticky label with the adjusted price to put on the garment. “It will help to
deal with some of the criticism that we are always on promotion,” Templeman
said.
He has also introduced a new mobile office – a flat computer pad that store
managers can carry round to check their e-mails and tasks for the day. The
combined investment for the mobile office and price checkers is over £7m –
only Tesco has a similar system – but Templeman is adamant it is already
creating huge efficiency gains as managers can work faster and more
effectively and spend more time on the shop floor.
Despite such investments Debenhams continues to be plagued by rumours that it
is close to breaching its banking covenants – even though it has cut its
debt burden from over £2 billion 18 months ago to £1 billion.
“It’s unbelievable. Two days after we announced our debt was £80m better than
expected everyone wrote stories about how we were going to breach our
covenants. We’ve never had an issue with headroom. Would I have let stock
levels go up by 18% at the half year, or commit £150m on capital expenditure
if we had a problem? We’ve made sure that we have enough tools in the
armoury to deal with our commitments even if sales came off,” he said,
adding that suggestions the group had been forced to renegotiate the terms
of some of its loans were “totally untrue”.
On the trading front, Templeman believes the company is getting it right this
season. “We were quite honest about what went wrong last year – it was
mainly an issue with menswear. Mark [one of the store managers] said he
wouldn’t have bought menswear last year andI don’t blame him. We lost half a
percent of market share on menswear because of that.”
The head of menswear has since been replaced and Templeman is convinced the
group is back on track. “If you look at market share I think we’ll end up in
the winning camp,” he said.
With a reputation as a favourite manager for private-equity groups after
turning round and selling Homebase and Halfords, Templeman must be looking
for an exit route from Debenhams, City watchers claim.
Unity, the investment group backed by Baugur, the Icelandic firm that owns
rival House of Fra-ser, may provide one if it decides to add to its existing
13.5% stake and table a takeover bid in the new year. Merging with a
European department-store chain is another possibility. Templeman insists
Baugur is treated like any other shareholder. On the possibility of a merger
he would only say: “I’m a supporter of European consolidation but not for
now.”
Friends insist he has too much pride to leave Debenhams without reviving its
share price. Templeman would only say: “I’ve got a great job. But I take
every day as it comes. You can never say what you’re going to do.”
