It’s been gruelling – but Debenhams customers want us to stay alive: Chairman Terry Duddy on his two-year turnaround plan
- Terry Duddy is chairman of stricken retail chain Debenhams
- Speaking to the Mail on Sunday, he reveals plans to restore its fortunes
- He opens up about that heated battle with Mike Ashley’s Sports Direct
Battling insolvency at one of Britain’s largest retailers, parachuting into the breach after a boardroom coup and sparring with an irate billionaire.
Any of those on its own would be enough of a feat for even the most seasoned executive over an entire career – but Debenhams chairman Terry Duddy has done it all in five months.
‘It would have been difficult anyway. But the situation with Sports Direct added further complication to what was already a difficult process,’ admits Duddy, speaking for the first time about being thrust into the hot seat at Debenhams and the often bizarre overtures of retail mogul Mike Ashley.
Upheaval: Chairman Terry Duddy has faced a series of crises in just five months
The beleaguered department store had been squeezed from all sides by high rents, property taxes, online rivals and a creaking store base of 160 giant shops.
One way or another, says Duddy, change was coming.
A series of events arguably begun under private equity ownership 15 years ago but accelerated last year after supplier insurers and corporate debt agencies turned against the company.
By the turn of the year it was running out of cash to pay bills despite a respectable trading performance.
The saga – well documented in these pages – saw the company, Duddy acknowledges, ‘move from crisis to crisis’.
‘I spoke to him [Ashley] a few times, particularly in January when things first kicked off, but there have been loads of communications with him,’ says Duddy, who stepped up from his part-time, non-executive board role to become interim chairman that month after Ashley ousted Sir Ian Cheshire at a shareholder meeting.
‘The thing has sort of been depicted as a battle. But the Debenhams board’s intent was always to do an equity-based restructuring [to ask more money from existing shareholders] and that couldn’t happen without Mike Ashley’s involvement.
‘So, regardless of any circumstances, we needed to invite him in,’ says Duddy of Ashley, the Newcastle United owner who also owned 30 per cent of Debenhams shares.
Duddy, former chief executive of Argos parent Home Retail Group, suggests ‘it didn’t work out’ which feels like an understatement.
Ashley began to wage a war of attrition which intensified as he realised his demands for control would not be met.
Amid scores of letters, phone calls and threats, Sports Direct even said Debenhams’ advisers belonged in jail.
The billionaire at one point took to firing off late-night missives from his £32million waterfront mansion in Miami, Florida.
Duddy played it cool – no doubt adding to Ashley’s chagrin.
‘We dealt with things day by day: on what we needed to do and how to do the right thing by everybody. I actually think the board remained really unemotional and remained really calm. We had a duty to the shareholders, duty to the colleagues and to the business overall,’ he says.
‘You have to balance all that every single time you make a decision – and these are very finely cut decisions where in retrospect somebody might say, ‘Well, shouldn’t you have done this or that.’ And everybody did a great job guiding us through it.’
Duddy says Debenhams is now poised to finish the first phase of the recovery plan
As relations with Ashley imploded, the department store’s financial situation became increasingly critical.
Debenhams turned then to its landlords and creditors: now a group of hedge funds which had cornered the market on Debenhams’ debt. A major lifeline was agreed with a partial insolvency, or CVA, but unfortunately shareholders were wiped out.
‘We’ve come through a pretty gruelling process. The very first stage now is to get this business in a stabilised position, to get confidence back in the business from both suppliers and customers.’
Duddy says Debenhams is now poised to finish the first phase of the recovery plan with major backers among lenders, suppliers and landlords on board.
He says it will take two years to complete the next phase, over which time more than 50 stores will close, up to 30 of the remaining 100 will reduce in size and 15 others will get a much needed make-over to help signal to shoppers the chain is still alive and kicking.
The lenders have provided £200million of capital to pay bills and buy stock and landlords have promised to tear up leases that have been sapping the life out of the chain.
Duddy says the average lease length is 19 years, the worst almost 40 years, with painful rent rise clauses. The dire situation bequeathed to the firm by its private equity owners meant annual rent payments of £300million on top of £80million in business rates.
It has also hatched a transformative deal with Hong Kong trading giant Li & Fung, which connects many shop chains to Chinese factories.
The firm will provide financial cover for suppliers of its own ranges, now about 70 per cent of sales, as well as speeding up the creation and manufacture of new designs with a state-of-the-art digital design service.
Billionaire Mike Ashley has attempted to install himself as chief executive of Debenhams
Any legal challenge for the vast restructuring will need to be filed with the courts by the end of tomorrow. If it comes, it is likely to be from Ashley.
But Duddy, who steered Argos through the financial crisis and intense rivalry from Amazon, is already looking to the future and has a shortlist of chief executive candidates. ‘There’s an opportunity here to re-establish the business – basically to start again.
‘Not start again completely, because we have a fantastic heritage over 200 years and there has been some very hard work going on in the business. But the CVA has given the opportunity to do a transformation that you don’t very often get the chance to do.’
Under previous chief executive Sergio Bucher – who, alongside Cheshire, was booted out by Ashley during his coup attempt – it overhauled ten stores and new ranges are already poised to launch this autumn.
Those include 1778 for men – the year it first began trading – and a women’s range that is still under wraps. The idea is to help satisfy the Debenhams shopper’s demand for more new products more often. Other ranges, including Principles, are being relaunched.
He says 19million people shop at Debenhams every year with its cosmetic ranges, Britain’s number one seller, being a particular draw and accounting for 25 per cent of its £2.3billion sales. He also says Debenhams needs to grow online sales beyond its existing £530million.
The big demand is for more people on the shop floor – another strategy that Bucher began but which will now be catalysed under Duddy.
‘Lots of people have written to us. A lot of customers want us to be there on our high street. Speak to people. Go out and ask them – do they want Debenhams on the high street?
‘They are telling us: absolutely, yes. But we’ve got to re-engage with them. We’ve got to give them the confidence that we’re going to be around.’
Terry Duddy, 63: from Debenhams to Dubai…
Family: Married with two sons. ‘My wife Melanie was originally a buyer at Dorothy Perkins so in 2014 when I stopped [working for Argos parent HRG] we decided we were both going to work. She bought a store in a local village and then opened a designer independent retail store in Marlow.’
Who do you admire? ‘Anyone who opened a shop and made a go of it.’
Weekends: ‘I haven’t really got a weekend at the moment because I took this on and I’ve still got other roles. I’ve got two board roles in Dubai. They tend to work weekends so I fly out on Saturday and the boards meet on Sunday or Monday.
I’ve also taken on a role at a [social welfare] charity called Catch22 and they have been very patient with me. It irks me when I think young people don’t get an opportunity or are missing out on opportunities.’
Claim to fame: Ran Argos when it was the first big retailer to launch Click & Collect. The first retail app purchase was made via Argos.
Books: ‘Earthly Powers by Anthony Burgess is still my favourite novel. I used to be great on novels but I don’t actually read that much at the moment. There was a time when you couldn’t have a Booker Prize list without me thinking “I’ve read most of those”. But I read more non-fiction these days: history, philosophy, different views on things.’