Fenwick cuts 400+ jobs as profits fall sharply
The bad news for department store retailers continues with Fenwick on Tuesday revealing that it has cut over 400 jobs in order to slash costs after its annual profits fell sharply.
The cuts are spread across management, support and store staff with over 100 of the redundant roles hitting its Newcastle HQ. However, as part of its restructuring plan, the company is also creating around 120 new roles, many of which will be based in Newcastle. The cuts have been achieved through both voluntary and compulsory redundancies.
The move comes following a 93% plunge in pre-tax profits in the latest year. Earnings fell to £2 million on the back of costs linked to its restructuring strategy and an impairment charge on the value of its properties.
But while those are one-off factors, it's undeniable that the company's performance itself has been less than impressive. In its latest year (the 12 months until January 26), gross sales fell 3.6% to £411.1 million and pre-exceptional operating profit fell from £14.4 million to £6.5 million.
The company said that its annual results reflect the challenging environment that all department store groups are facing as competition from online retailers continues to bite. That’s especially so for Fenwick, which doesn't yet have its own webstore.
But other factors have put the sector under pressure and Fenwick has also been suffering as declining footfall has cut the number of people going into its shops. Without a webstore to win back some of the lost sales, the company has been doubly hit. And of course, the need to resort to discounts has undermined profits as rival chains such as House of Fraser have been extremely promotional.
Department stores, which are rarely seen as the best places to find keen prices, have also been hit by crimped consumer disposable incomes as inflation has been rising faster than many salaries.
A Fenwick spokeswoman said that the company has “restructured parts of the business and [we] have made the difficult to decision to cut staff numbers across the business, reducing total headcount by 421 to 2,879.”
So where does that leave the company? Although times are clearly tough, it continues to say that its transformation plan is on track and the fact that sales fell only “slightly” in the last year is seen by management as a testament to the strength of its brand and its overall offer.
And at least with its long-awaited webstore due to go live early next year, it should finally be able to make the most of the opportunities offered up by consumers who are migrating online.
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