Debenhams fashions 'social shopping' future but investors seem unimpressed

What is Debenhams (Frankfurt: D2T.F - news) for?

That is the question Sergio Bucher has been asking since becoming chief executive of the UK's second biggest department store chain seven months ago.

Today, he offered some answers .

For some time now, financial journalists have routinely inserted the adjective 'ailing' into their copy on Debenhams, for several reasons.

The group's profitability has declined steadily during the last decade or so, with operating profits drifting from £175m in 2011-12 to £155.4m in 2012-13, then falling again to £124.1m in 2013-14. After a rise to £134.1m in 2014-15 they fell again last year to £118.6m.

That, despite a rise in sales over the period from £2.23bn in 2011-12 to £2.34bn last year.

Debs was also the poster child, for a while, for everything seen as wrong with private equity.

It was bought in 2003 by CVC (Taiwan OTC: 4744.TWO - news) , Texas Pacific and Merrill Lynch Private Equity, who stripped out costs, sold freehold properties and loaded the business with debt before re-floating it on the stock market in May 2006.

It served the consortium well - they more than trebled their £600m investment in less than three years - but left Debs ill-equipped to compete in a market that, due to the rapid growth of online shopping and the rise of so-called 'fast fashion', was becoming ever tougher.

That was more than a decade ago - and yet many decisions made in that period have since haunted Debs which, in recent years, has relied heavily on discounts and clearances to prop up sales.

The balance sheet has been patched up, with net debt having been cut from £1.4bn immediately after the 2003 takeover to just £279m at the end of the last financial year, while - impressively for a retailer - the pension scheme is in surplus.

But Debs has struggled to explain to both shoppers and investors the relevance of department stores in this day and age.

It has not been alone in this challenge, with House of Fraser having suffered hiccups in recent years, while BHS has gone bust and Allders vanished.

Of the UK's big department store chains, only the seemingly invincible John Lewis has navigated the last decade relatively smoothly.

Mr Bucher, who ran Amazon's European fashion business for three years before he joined Debs, and whose CV also boasts stints at Nike (Sao Paolo: NIKE34.SA - news) 's retail arm and at Inditex (Amsterdam: IT6.AS - news) , the owner of Zara, aims to focus on what he calls 'social shopping'.

This sees shopping as "a fun leisure activity with friends and family and shared via social media", with the mobile phone at its heart, enabling customers to find stores, browse and check the availability of items, write reviews of the fashion and beauty products they buy or simply seek opinions on them from friends.

He says the mission is to "make shopping confidence-boosting, sociable and fun" and there will be a focus on shopping "experiences" such as beauty makeovers, nail and blow-dry bars and, of course, cafes and restaurants.

The stores will also be overhauled, with 2,000 staff being moved from back-office functions to customer-facing positions. The 'Designers at Debenhams' concept faces a shake-up and a drive to rid stores of clutter is already underway.

Mr Bucher notes: "Debenhams is like a treasure hunt - there's some great stuff, but you have to look for it."

Click (Shenzhen: 002782.SZ - news) and collect, such a success for John Lewis, will also play a larger part.

The market, to judge by the share price reaction, is unimpressed - although, arguably, that is as much to do with the trading update accompanying today's strategic overhaul.

Mr Bucher will close up to 10 stores, which is probably fewer than some investors hoped, given that, while Debs has 176 stores, John Lewis regards 60 stores as about right and House of Fraser has just 50.

In response, Mr Bucher has pointed out that Debs has no loss-making stores, while the length of some store leases - a factor that made life hard for BHS - precludes shutting more.

Everything that Mr Bucher proposes for this 204-year old business makes sense. Some of it is quite exciting.

However, as he has provided no sales or profit targets against which his progress can be measured, investors appear sceptical the Swiss-Spanish chief executive can pull off the promised recovery.