Debenhams chief wants supply chain flexibility

21 October 2011

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21 October 2011 | Adam Leach

Department store chain Debenhams is looking to retain flexibility in its supply chain as much as possible, its new CEO has said.

The high street retailer reported a rise in pre-tax profits in its full year results, published yesterday, to £160 million compared with £140 million last year. However, due to the uncertain future of retail and the wider economic climate, the company’s new chief is looking to ensure as much flexibility in its sourcing as possible.

CEO Michael Sharp said: “It is right to remain cautious about the strength of consumer confidence over the next 12 months given the uncertain economic outlook. We will therefore continue to run the business with tight management of costs and stocks, retaining as much flexibility as possible in the supply chain to enable us to deal with whatever the market presents.”

The company’s annual report revealed that, despite the rise in pre-tax profits, increasing commodity prices, particularly cotton, placed added pressure on the supply chain. It said: “There was significant pressure in the supply chain during 2011 as our buying teams faced substantial increases in commodity prices. The most significant was for cotton. The NationalCotton Council of America's A Index reports that the average price has risen to 175.2 cents per pound in 2011 compared with just 62.75 cents per pound in 2010.”

In response the company took action to try to mitigate the effects, including adapting its product range, changing packaging size and sourcing products from low cost countries.

Yesterday also saw the release of the latest retail sales data from the Office for National Statistics. Despite recording a rise of 0.6 per cent for September, analysts had forecast no change, the figures for summer spend were revised down. Chris Williamson, chief economist, Markit, said: “We are seeing an even weaker trend in spending than previously thought. On a three-month on three-month basis, sales were down 0.2 per cent in September.”

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