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Market Commentary

​​Weekly Retail & Leisure News - 27 October, 2014

Debenhams turnaround plan paying off as retailers evaluate big box space

​Debenhams, the UK's second largest department store chain, has announced that its turnaround plan is starting to pay off. The retailer has reported pre-tax profits of £87.2m in the year to 30 August. The retailer also announced that LFL sales were up 1% and that their online sales increased by 17.6% to £430.7m. E-commerce sales now account for 15.3% of total sales and are up from 13.2% in the previous year. These positive sales follow their on-going turnaround plan which included investing in their e-commerce platforms and adapting their offer by introducing new concessions, including Sports Direct, Costa Coffee and Mothercare.

"E-commerce and urbanisation are two incredibly powerful trends that are re-shaping the retail world and revolutionising the shopping experience" Tim Vallance, Head of UK Retail commented. He continued that "it is no surprise that retailers are evaluating their physical store portfolios in the wake of these changes." This observation is relevant as two other key UK retailers have announced that a proportion of their big box space may not be in line with strategy going forward. Home Retail, Britain's biggest household goods retailer, announced that it plans to close a quarter of its Homebase home improvement stores by 2018. While Tesco's new boss, Dave Lewis, admitted that a third of its hypermarkets are failing.

Retailers and landlords focus therefore should be on continuing to adapt to the increasingly virtual and multi-channel world. The physical experience is vitally important and all operators should aim to create a broad interactive experience. One new leisure operator to UK that will broaden the appeal of physical space is Kidzania, the educational children's entertainment theme park. The Mexico-based group's first UK centre will open early next year at Westfield London but has announced this week that it is planning another two UK sites that could create 900 jobs.

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