Debenhams 

Profits at Debenhams are down by 85 per cent.  The weather, government and the company from Seattle, Amazon, got the blame.

 

As these words are written, the UK is enjoying its hottest April day since 1949. Yet, just a few weeks ago, Brits maybe got an inkling of what it is like to live in the Arctic.

 

The Beast from the East brought with it a chill wind for retailers. Profits at Debenhams were down 85 per cent to £13.5 million in the latest half-year. And cold weather got the blame.

 

Chief executive Sergio Bucher said: “It has not been an easy first half and the extreme weather in the final week of the half had a material impact on our results.”

 

Well, those words tally with the official statistics. According to The ONS, retail sales dropped 1.2 per cent in March, thanks to the weather.

 

Yet online seems to be going from strength to strength. Online sales at department stores were up by a third over the last year.

 

Debenhams and its supporters look at another problem: business rates.

 

Mr Bucher, who used to work at Amazon, where he was head of the European fashion business until he joined Debenhams around 18 months ago, said that government tax policy was “unfair”.

 

The likes of Debenhams pay through the teeth on business rates, while Amazon is all toothy grins on how little it pays in tax.

 

Justin King, former boss of Sainsbury’s agrees. He told ITV: “Consumers will tell you that one of the main reasons they use the internet is the prices are more competitive. And one of the reasons they are more competitive on the internet is there are taxes that other retailers pay that they don’t.”

 

On the other hand

 

But hold on a second.

 

Isn’t the whole thing about online that you can be based somewhere cheap, in warehouses miles away from shopping centres, shipping products without the high overheads that come with high street position.

 

They used to say that success in retail requires three Ps: position, position and position. But with online, position on Google is more important, unless you are called Amazon, in which case position in people’s thoughts seems to count for more.

 

That’s why Amazon is cheaper.

 

And one of the reasons it pays less in tax is because its profits to turnover are actually quite low. You may feel it is unfair how Amazon can, with its deep profits, get away with such a massive market share on such thin margins, but that is not the issue here.

 

Online is meant to be cheaper. It’s kind of the point. 

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