Debenhams chief: Our top stores may face axe

The chairman of the department store chain Debenhams has said its biggest city centre stores are ‘vulnerable’ to closure without a large-scale Government intervention to avert disaster.

Mark Gifford said last night that he was lobbying Whitehall at ‘every single level’ to head off a town centre crisis that would be likely to see swathes of the West End of London and other major cities boarded up.

In his first major newspaper interview, Gifford said his stores in London’s Oxford Street as well as Edinburgh, Manchester and Leeds were all facing closure after a ‘torrid’ year as the pandemic delivered a hammer blow to some of Britain’s most familiar high street names.

He told The Mail on Sunday that they were among 30 to 40 of his 124 stores that could face the axe in the coming months without a signal from the Government that tax bills would be slashed. The chain closed 22 stores in January, warning that more closures might follow.

Gifford said Debenhams had been performing ahead of its business plan, which was drawn up before stores reopening in June. Sales have reached 80 per cent of last year’s levels across the chain after rising ten percentage points week-on-week for the past three weeks.

But despite renewed optimism at the troubled chain, which entered administration for the second time in April, its flagship Oxford Street branch remains its worst performer with sales still at half of last year’s levels despite it being the most expensive store to maintain.

Other major cities – where many office workers have so far failed to return and shoppers are reluctant to visit – are also struggling, holding back a recovery for the chain.

Despite talk that liquidators had been lined up, Gifford swept aside the possibility of a collapse of the chain. He admitted that his and other chains would struggle to survive another national lockdown.

However, he said he ‘absolutely’ gave a personal guarantee that the chain would continue trading until after Christmas, at which point store contracts could be overhauled and unprofitable branches closed in light of festive trading failures. 

He admitted: ‘Some of them aren’t going to make it. Some will have to close. We’re looking at them every week to see how things develop.’

He added: ‘Sales are returning every week, we are building more confidence, and shoppers are returning in bigger numbers.

‘But Oxford Street is really vulnerable. It has a £5.5million annual rates bill – eyewatering. It’s the fourth most expensive in the country after Harrods and Selfridges and John Lewis on Oxford Street.

‘You go to cities like Edinburgh and it’s the same story – Leeds, Manchester, Glasgow.

‘Is London going to return? Is Manchester going to return? We’ve been open for 12 weeks, in the best locations, and are seeing really good footfall outside the big city centres, but not inside them. It’s too early to say we are closing stores in those centres – some were our most profitable stores. So we’d like to keep them open. But we can’t keep them open forever on a hope.’

High street businesses were handed a 12-month business rates holiday in March after the pandemic struck. But Gifford said the Government must not wait until the holiday ends in April next year before making further reparations to protect Britain’s town centres.

‘This is a massive problem. At the moment we have to assume we will be paying full business rates from April because the Government hasn’t said otherwise,’ he said. 

He added that the increase in trading over recent weeks and unexpected windfalls, such as savings on its foreign exchange costs, meant it had £50million more cash than it had previously anticipated.

Gifford, who was appointed chairman less than a year ago to salvage the business, said: ‘We’ve done some fabulous deals with our landlords. Without that the business would be having a closing down sale right now. That’s the truth.

‘First we had a rent holiday and now we’re paying landlords on a turnover basis. So rents have changed considerably. But business rates have not. So we are going into a battle with the Government on this now. We are lobbying at every single level but the decision-making process is very slow.’

The industry estimates 200 of 300 shops along Oxford Street would be boarded up if nothing changes. Gifford said: ‘Can you imagine tourists arriving at the nation’s favourite high street to find half of it is boarded up? It’s already happening. Shops are closing down, businesses are failing and nobody is opening up.’

He said Debenhams – in administration and being supported by its lenders – is taking an ‘aggressive’ stance on next year’s rates bills. Gifford is taking advice from top insolvency lawyers he says would vastly cut the rate payments to ‘a very, very small amount’ of previous bills for the duration of the extended administration process.

He added that slashing rates – which have long been a ball and chain for high street stores, unlike their online counterparts – would give Debenhams breathing space to revive its fortunes. 

He said the chain was likely to stay in administration until the reorganisation was complete and the Government had cut rates, allowing for new investors or a buyer to be found.