Call comes as department store announces store closures after worst loss in 240-year history.
The boss of Debenhams has called on the government to end the “preferential” tax regime for online retailers as the department store said it could close almost a third of its stores, putting about 4,000 jobs at risk.
The chain said it had dived nearly £500m into the red, the worst annual loss in its 240-year history, as it struggles to adapt to changing habits which have resulted in a quarter of all fashion purchases being made online.
Like many other retailers, Debenhams is suffering as rising rents, business rates and wages have driven up costs just as shoppers rein in their shopping in favour of leisure activities and telecommunications.
Sergio Bucher, the firm’s chief executive, told City analysts business rates had risen 20% to £5m at Debenhams’ Oxford Street store alone. The company now pays £80m a year in rates, after an average 5.8% rise in bills across its stores this year. Business rates are levied on the value of commercial properties including shops, but online retailers such as Amazon and Asos pay much less because they own low-value property such as warehouses.
Bucher said: “It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.”
He said Debenhams’ profits had taken a hit in September as it was forced to cut prices in order to keep up with competitors who had launched early sales.
Revenues slid 1.8% to £2.9bn in the year to 1 September, but it was one off charges of £525m relating to the value of the brand, unwanted store leases and defunct IT systems that pushed the company to a pretax loss of £492m from a £59m profit a year before.
Bucher said the company was “taking tough decisions on stores where financial performance is likely to deteriorate over time” and bringing in “rigorous cost discipline” so that Debenhams had a sustainable and profitable future.
“Debenhams remains a strong and trusted brand with 19 million customers shopping with us over the past year,” he said.
The company said store closures would take place over three to five years, as it confirmed that a far greater number of its outlets than previously admitted were likely to become unprofitable and need to be shut down. It said last year that it would close up to 10 stores and has already shut two.
Analysts said Debenhams’ smaller stores in regional towns were likely to be the first to close, bringing more pain to high streets already suffering from a wave of retail closures by the likes of New Look, Carpetright, Mothercare and Marks & Spencer.
As it struggles for survival, Debenhams, which employs 27,000 people, suggested more jobs could go at its head office and warehouses at it cuts costs by £40m and halves investment to £70m. It will focus attention on improving 100 top outlets and downsizes and cost cutting at 20 others.
The company has also axed a dividend payout to shareholders, as it prioritises reducing its debts. It is already trying to sell assets, including its Danish chain Magasin du Nord, in a bid to shore up its finances.
The company’s share price dipped 2% to just 8.3p, adding to a slide of more than 75% in the past year. The business is now valued at less than £100m after three profit warnings this year have fuelled fears that it could follow House of Fraser into administration.
Sports Direct, which recently bought the collapsed House of Fraser and is a major shareholder in Debenhams, is tipped to launch a takeover of the department store if its financial situation worsens.