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Debenhams boss Michael Sharp to step down in 2016 amid shareholder pressure

Published 22/10/2015

Debenhams reported a 7.3% rise in full-year pre-tax profits to £113.5 million
Debenhams reported a 7.3% rise in full-year pre-tax profits to £113.5 million

Debenhams boss Michael Sharp announced plans to step down in 2016 to end speculation over his role at the group amid shareholder pressure for a boardroom shake-up.

The department store chain said Mr Sharp, who became chief executive in September 2011, will remain in the role throughout the key Christmas trading season, but plans to step down "some time in 2016" after helping find his successor.

Mr Sharp insisted he had always intended to serve a five-year term at the retailer and refused to be drawn on whether his decision came as a direct result of recent pressure from institutional investors.

He said: "I accepted the job of chief executive with the intention of spending five years in the role and although it will be difficult to leave a fabulous company like Debenhams, now is the right time for the board to begin the process of identifying my successor."

He added: "I hope being transparent about my intentions will stop recent speculation becoming a distraction, allowing me and the Debenhams team to focus on delivering our strategy and the important Christmas trading period."

Details of his planned departure came as the retailer reported a 2.9% rise in underlying pre-tax profits to £113.5 million for the 12 months to August 29 - its first rise in annual profits for four years.

Profits were 7% higher on a bottom line basis and Mr Sharp said the retailer's turnaround strategy was "clearly working".

Results showed UK like-for-like store sales fell 0.3% over the full-year, although this was offset by a 1.3% rise in like-for-like online trade as it boosted its web and mobile app offer.

International like-for-like sales lifted 1.1%, including an 8.1% surge for its Magasin du Nord chain.

Debenhams cautioned the market remained competitive, but Mr Sharp said the group had made an encouraging start to the new financial year and was in "excellent shape" for Christmas.

Reports last month suggested some of the major investors in Debenhams were unhappy with its performance and were seeking a board shake-up after disappointing results in previous years.

It is thought City broker Cenkos was one of those pushing for change at the top.

Debenhams, which has 161 UK stores out of 248 internationally, has struggled in recent years to keep pace with the likes of House of Fraser and resurgent rival Marks & Spencer, with one retail expert recently saying it had "clearly lost its way".

But chairman Nigel Northridge paid tribute to Mr Sharp and said the latest figures showed his turnaround efforts were paying off.

He said: "I would like to thank Michael for continuing to lead Debenhams through a crucial time of change in retailing and for the good progress the company has made under his leadership.

"He has worked enormously hard to develop the company's strategy and the benefits of this are really starting to show in the results."

The City gave a thumbs up to its annual results, which mark a sharp reversal of the 24% plunge in profits in the previous year.

But Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said Debenhams remains a "work in progress".

"The middle ground it occupies between discount and high end clothing retailers continues to be challenging, with rival Marks & Spencer still cultivating its own recovery programme," he added.

Debenhams has been refreshing its ranges, cutting back on sale days and launching more concessions at its stores to revive sales.

It said it reduced sale days by 17 days over the year, bringing the total cut out to 42 since spring 2014.

The group plans to take part in the Black Friday discount day this year after trading "successfully and profitably" on the day before last Christmas.

It also confirmed an expected hit from the incoming national living wage, estimating it will cost it an extra £3 million in the new financial year and £8 million the following year.

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