Treaty Centre: the death of Debenhams.

22 April 2022 0 By Steviemac

If I were marketing commercial space in a shopping mall, like Hounslow’s Treaty Centre, I would have described Debenhams as being the anchor of the site. It was a well known department store and one of its roles was to draw shoppers in the area so they could visit other shops in the building. But even before the Covid pandemic, the department store model appeared to be in trouble. The stores’ strength had been in their town and city centre locations and their commercial, rental and capital value. 

They also had a cultural value. Shoppers would remember where they bought the utensils for their new flat or house. It supplied the variety of clothes and gifts for weddings. So there may have been a sentimental attachment for several generations. 

So what was the source of that trouble that led to Debenhams being an online brand only, bought for £55m in January 2021 by BooHoo Group.

Debenhams’ Chief Executive, Belinda Earl, sold the retailer in 2003 to a private equity consortium called Baroness Retail Limited, comprised of hedge funds TPF (Texas Pacific), CVC Capital Partners, and Merrill Lynch Global Private equity. They paid in £600m. At that point Debenhams’ debt was reported as £100m.

Rob Templeman was installed as Chief Executive by the consortium and the retailer was again listed on the Stock Exchange in 2006 with a price tag of £3bn. At that stage, Debenhams’ debt was £1.2bn and the private equity owners had taken £1.3bn out of the business in dividend payments. 

During Templeman’s management, it was reported that the Debenhams’ brand suffered as goods were discounted to shift them in an attempt to boost profit margins. He also remortgaged some stories and sold others. These were then leased back to Debenhams’ in expensive 35 year rent deals. These deals were a major contribution to its debt problems and profit warnings had been issued just weeks after the Stock Exchange listing. 

On top of that, many of the stores concessions, owned by Philip Green’s Arcadia Group, failed after the Group went into administration. 

JD Sports, owned by Mike Ashley, made persistent attempts to buy the store out of administration, but gave up after the Arcadia Group went into administration. 

In March 2022 The Guardian reported that nearly 90% of Debenhams high street shops were still empty. Many are now awaiting conversion.