Debenhams Plc Business Information, Profile, and History

History of Debenhams Plc

Debenhams Plc is one of the United Kingdom's longest continuously operating clothing and goods retailers. The company owns and operates nearly 100 department stores, primarily in England. In the British market, Debenhams' annual sales of more than £1.3 billion place it among the country's top five retailers. Founded in 1778, Debenhams operated as an independent company until its hostile takeover by the Burton Group in the late 1980s. In 1998 Debenhams regained its independence when it was "demerged" from the Burton Group, which subsequently changed its name to Arcadia Group plc. Former Burton chief John Hoerner has taken charge of the new Arcadia Group, while the newly independent Debenhams continues to be led by CEO Terry Green.

18th-Century Origins

The first incarnation of what would later become known as Debenhams started up in 1778 as Flint & Clark, a London-based seller of clothing and other items. The Debenham (later Debenhams) name was added in the early 19th century, when William Debenham joined the company. The company, now known as Clark & Debenham, operated a store on London's Wigmore Street. Clark & Debenham would soon become a London fixture, expanding to operate stores throughout the city and into other parts of the United Kingdom as well. When a new partner joined the company, its name changed once again, to Debenham and Freebody. By the turn of the century, however, the company would become known simply as Debenhams.

Throughout its first 100 years Debenhams had grown to include not only a number of stores, but also its own manufacturing operations, producing the company's own clothing designs. In this capacity, Debenhams would build a strong--and somewhat exclusive--reputation; among its customers, Debenhams counted none other than Queen Victoria. The company would continue to build its reputation into the 20th century, especially with the opening of the first Debenhams department store in 1905. In the same year, the company incorporated under the Debenhams name.

Debenhams would convert its other stores to the department store format over the next decades. The company also expanded beyond its own stores, purchasing Harvey Nichols in 1913. The Harvey Nichols name, featured in Debenhams stores and in its own stores, would grow to become an exclusive, high-end label. In 1928 the ever-expanding Debenhams went public, listing its shares on the London Stock Exchange, just in time for the Great Depression.

By then Debenhams had been joined on the British retail scene by Montague Burton. That company had been founded in 1904 by Lithuanian tailor Moshe David Osinsky, who had changed his name to Montague Burton when opening his first shop in Chesterfield, England. The Montague Burton name apparently appealed to the British consumer: by the end of World War I the company operated some 40 shops. The company eyed still further expansion, going public in 1929. Marketing to the rising British middle class, offering quality clothing at affordable prices, Montague Burton weathered the Depression era in style. By the outbreak of World War II Montague Burton had grown to a national chain of more than 600 stores, with its own manufacturing facilities producing most of its goods. Founder Burton continued to run the company until his death in 1952; the company's name was simplified to the Burton Group in 1969.

In the post-World War II years Debenhams found itself playing catch-up in a marketplace featuring rising stars such as Marks and Spencer. One problem was the company's structure, which owed more to its 18th-century roots than to the modern commercial era. Although the company had continued to add new stores, each of its stores remained more or less independent while grouped under the Debenhams name. Purchasing, warehousing, and other functions were performed at individual locations, rather than through a centralized source. In addition, the positioning of some of the company's stores placed them in direct competition with other Debenhams stores, cannibalizing sales. Once a leader in the London department store market, Debenhams was soon outpaced by Marks and Spencer, among others.

Beginning in the 1950s, however, Debenhams began building a new, stronger, and more centralized management. The company took steps to streamline its operations, particularly in its purchasing program, reducing these expenses while strengthening consistency among the Debenhams stores themselves. The process of transforming Debenhams into a modern firm would continue into the 1960s.

Regaining Independence in the 1990s

As Debenhams continued consolidating its centralized operations, the Burton Group began to seek further expansion opportunities. In the 1970s that company would add new chains to its operations, creating a new format, the Top Shop, with women's fashions, and purchasing two existing chains, Dorothy Perkins and Evans, rounding out the company's women's fashions offerings. The Burton Group later expanded the Top Shop concept to include Top Man, seeking to appeal to a younger consumer group than the Burton Menswear stores. Closing out the 1970s, the Burton Group shut down its manufacturing operations, turning entirely to its retail stores. The appointment of Ralph Halpern as CEO and then chairman heralded a new era of expansion for the Burton Group. Under Halpern, a flamboyant figure who later would be knighted, the Burton Group would add a new store concept, Principles, and begin eyeing a new and greater extension of its operations.

By the 1980s Debenhams had grown as well. The company operated some 65 department stores. It also had attempted an expansion, buying up the Hamley toys retail chain. This acquisition was resold soon after; however, the Debenhams stores would continue to feature Hamley toys. Nonetheless, Debenhams was facing difficulties. The recession initiated by the oil crisis of the early 1970s had had lasting effects on the British economy, which continued in its slowdown into the 1980s. Debenhams revenues were slipping, as was its share price, making the company a ripe target for the hostile takeover rage of the 1980s.

That bid came in 1985, when the Burton Group launched a takeover of Debenhams. The department store company, independent for more than 200 years, fought to regain control, including seeking a white knight in competing retailers. In the end, however, the Burton Group won control of Debenhams, for a price of nearly US$900 million. Halpern brought in the American John Hoerner, seconded by Terry Green, to revitalize the ailing Debenhams chain.

Hoerner and Green took Debenhams on a restructuring program, closing stores, reducing departments, cutting back on sales events, and introducing a series of company-owned brand names. Much of the new management team's efforts went toward repositioning Debenhams, which had slipped in prestige to the lower end of the market, toward a mid-range store concept.

By the end of the 1990s Debenhams was on its way to recovery--both in sales and profits. The Burton side, however, had run into difficulties, with a number of decisions made by the high-flying Halpern proving costly to the company. When Halpern resigned in 1990, his position was taken over by John Hoerner. The following year, Hoerner named Terry Green as CEO of the Debenhams operation. Green continued to expand the store-owned range of brands, bringing that number to around 40, each targeted to different market segments and product categories, by the mid-1990s. As Debenhams regained its profit and sales momentum, the company slowly began to seek new store openings.

The United Kingdom was hit by a new extended recession during the 1990s. As the effects of that economic crisis began to diminish in the second half of the decade, the Burton Group featured the successful Debenhams department store chain on the one hand and its portfolio of clothing retail chains, mostly struggling, on the other. In 1997 Hoerner announced that the Burton Group would "demerge" from the Debenhams chain, restoring the department store group to independence as a public company.

This move was taken at the beginning of 1998, at a cost of some £65 million. John Hoerner surprised analysts by remaining with the less profitable Burton Group. Terry Green remained as the Debenhams chief executive. In 1998, wishing to make a break with the past, the Burton Group renamed itself Arcadia Group plc.

Restored to independence, Debenhams featured more than 90 department stores, 118 restaurants, a growing wedding gift service, and a vibrant range of proprietary as well as internationally recognized brands. The company also had taken the first steps toward an international presence, entering a franchise agreement with the Middle East's MH Alshaya Group. The first two Middle East locations were opened in 1998, in Bahrain and Kuwait; two more Middle Eastern stores were scheduled to open in 1999, in Dubai and Jeddah.

Debenhams continued to expand its U.K. presence as well. In 1998 and 1999 the company embarked on an ambitious expansion plan, calling for the opening of 17 new stores and the modernization of some ten existing stores. Debenhams closed out its first year of regained independence with rising profits and rising revenues. The company could turn toward its third century as a mainstay of the British retail scene.