Burton to demerge Debenhams

The Burton Group has startled the retail world by announcing plans to demerge its flagship Debenhams department store chain, which will be floated separately on the stock exchange.

As part of the plan, the Burton corporate brand will disappear as the company’s remaining businesses are reorganised into a single business under Burton Group chief executive John Hoerner. Terry Green, chief executive of Debenhams, will lead the demerged department store group.

Chairman Sir John Hoskyns said this week that the demerger plan, originally mooted in 1994, was put on hold despite its “underlying logic” because of weaknesses in the business performance of Burton’s remaining retail chains.

Richard Hyman, chairman of retail analysis company Verdict Research, says a demerged Debenhams could expect a warm welcome on the stock market, as the department store sector “enjoys its strongest performance in decades”.

The remaining Burton Group may face a tougher time because of its weaker trading performance, says Hyman. “But its management team is tried and tested, and there is a lot of potential for recovery in business performance in the multiples businesses,” he adds.

The residual Burton Group, accounting for just over half existing turnover, will comprise 1,369 retail sites operated by Dorothy Perkins, Burton Menswear, Top Shop, Evans and Principles. The group also owns home shopping brands Racing Green, Hawkshead, Innovations and McCord.

Turnover at Debenhams is expected to comfortably break through the 1bn barrier this year, compared with 998.3m sales achieved in the 12 months to August 31 1996.

Debenhams achieved a profit of 102m for the group over the same period, compared with 58.8m achieved by Burton’s other multiples on a turnover total of 1.02bn.

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