Analysis from Richard Perks on third quarter Debenhams sales results

Commenting on the third quarter figures from Debenhams, Mintel’s Director of Retail Richard Perks said:

Comment

“A sharp slowdown in the third quarter, with like-for-like down from around 3.5% to flat. The market certainly slowed down and the comparison with the two day bank holiday last June was demanding. Debenhams just says that the trading environment was “challenging” and, Mayday bank holiday apart, the weather was unseasonably cold.
Debenhams says that it has held on to market share and we think that is probably right, but that compares with a period when it was gaining share and this quarter has had a significant boost from Magasin du Nord in Denmark, whose performance had been lacklustre in the first half. This adds some evidence to the suggestion that M&S trading has improved in the last quarter.
We remain positive about the company. The brand strategy is being delivered well and there is a strong online proposition – online sales were up 40% in this quarter and are now running at 14% of turnover. It has helped that M&S has been underperforming, and we wait to see what Debenhams will make of its Oxford Street flagship, due to be relaunched in December, but we think the business is soundly based for the longer term.”

Fashionability: strong private labels

“Debenhams has gained shoppers from M&S thanks to a more fashionable and better segmented offer. The department store has excelled through its focus on improving its womenswear offer by increasing the Designers at Debenhams range and introducing new concession brands.
Ongoing augmentation of its Designers at Debenhams range, building its previously under-indexed women’s casualwear offer, and bringing in new concession brands, such as Fuse and Quiz, are all playing a part too.
Over half of what Debenhams sells can only be bought in Debenhams, which brings a number of advantages in terms of flexibility, stock control and gross margins.”

Consumer profile: winning younger shoppers

“Mintel’s exclusive research found Debenhams is the second most popular department store overall behind Marks & Spencer (if we count M&S as a department store).
Our research found Debenhams has overtaken M&S in popularity for womenswear and menswear shopping: 62% of our sample purchased womenswear and 58% bought menswear from Debenhams in the six months to March 2013, compared with 60% who bought womenswear and 56% who bought menswear from M&S (figures cover in-store and online shopping.)
Mintel’s consumer research shows the typical Debenhams customer is closest to the midmarket in age and affluence terms than any other department store – including M&S.Our research found shopping at Debenhams peaks among the 25-34 age group, much younger than the 55-64 peak at Marks & Spencer and John Lewis.
The 25-34-year-old age group are the most frequent department store shoppers both in-store and online – suggesting Debenhams is appealing to the right demographic.”

In summary:

Although Debenhams is a department store, clothing, and particularly womenswear, is at its core. The retailer looks to have hit the mark in this category in recent times and has almost certainly gained shoppers from M&S thanks to a more fashionable and better segmented offer.

Mintel’s research found Debenhams’ typical shopper is closest to the midmarket in age and affluence terms than any other department store. This implies Debenhams is more successfully targeting the middle of the market than M&S.

At the same time, shopping at Debenhams peaks among the valuable 25-34 age group, again suggesting that it is hitting the mark in fashionability.

But M&S is pulling out all the stops for its autumn/winter womenswear collection and any recovery in womenswear at M&S poses a threat to Debenhams’ strong performance.