Michael Sharp’s decision to step down as chief executive at Debenhams at some juncture in 2016, after five years in what has been quite a hot seat at the department store group, is a difficult one to call. Will he be leaving the business in a better position, more able to deal with the competition in both the bricks‑and-clicks sales arenas? Or is Debenhams’s patchy performance during Sharp’s tenure likely to be bequeathed to his successor, and the improved annual sales and profits the group also announced yesterday just an illusory turning of the corner, with normal lacklustre service as likely to be resumed as not?
Context is helpful. Annual profits are up 7 per cent at £113 million, but still well off the near-£140m of two years ago. Headline like-for-like sales at Debenhams are up 0.6 per cent, better than being in decline, but also not going to root up any trees in the City.
The share price, up a few per cent yesterday at 83.8p (on the results or the news Sharp’s days are numbered?) and up a third over the past 12 months, are still well below their peak of 124p in November 2012.
Critics say the boss has taken too long to crystallise Debenhams’s core strategy, which is now centred on reducing margin-sapping promotions, adding concessions in under-used store space, while expanding online and internationally.
There has been associated turbulence. Just under two years ago the City demanded the scalp of the finance director Simon Herrick, who carried the can for two profits warnings in nine months following previous over-optimistic guidance.
Some analysts felt Herrick being fed to the wolves was the only thing that saved Sharp at that time, about halfway through his tenure.
There is nothing particularly flawed in the strategy adopted. And it seems execution has been getting better. But Debenhams has largely bet the house on bringing in outside concessions, from top designers to Mike Ashley’s less than stylish Sports Direct, which somehow shines a light on perhaps the dearth of homegrown Debenhams product.
It says a lot that Ashley (admittedly the maverick’s maverick) allowed himself to call Debenhams’ offering “crap” at a Sports Direct analysts’ meeting earlier this year despite having a retail alliance and a 10 per cent stake in the department store group.
Sharp has clearly made headway but not without headaches. And judgment on his legacy will need to be deferred.