Debenham’s CFO Resigns After Profit Warning

Simon Herrick, chief financial officer for the U.K.-based Debenham’s department store, has announced his resignation following a turbulent year that saw company executives issuing two separate profit warnings, the latest coming at the very end of 2013.Herrick’s resignation was perhaps not surprising, given that the retailer’s traditional Christmas discounts failed to draw the business the department store giant expected this year. Combined with a nearly $12.5 million surprise tab incurred by moving the corporation’s head office in October, it has not been a banner financial year for Debenham’s.

In early December the company asked suppliers for contributions to help fund “mutually beneficial” investments, a move that has echoes in Marks & Spencer and John Lewis’s similar requests. It wasn’t enough to spur holiday sales, however, and the tepid season was the last straw for Herrick at Debenham’s. The search is underway for his replacement; in the interim Director of Finance Neil Kennedy takes his place.

Why has Debenham’s struggled, while competitors like House of Fraser have posted their best numbers ever?

  • Discounts not drawing customers. House of Fraser declined to join in the holiday price-slashing, and experts think this helped attract customers to the brand. Debenham’s and Marks & Spencer both slashed prices due to limping sales, and both posted poor numbers. It seems that shoppers are looking for the impression of quality and are willing to pay full-price for that quality.
  • Unexpected expenses. The eight-figure bill that the company ran up during its move of corporate HQ was totally unexpected, and ate a huge hole in the company’s bottom line this year. This shook investor confidence and possibly hurt the overall brand name in the process.
  • Customers buying brand names. House of Fraser stocks well known international brand names, while Debenham’s largely sells its own brands. It is possible that customers are trending toward recognized brands over relative unknowns.

Debenham’s shares are currently at about $1.50, reflecting sharp declines in the wake of the profit warning and news of the resignation. The company will be extending its holiday discounts into the new year in order to move through back stock.

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