Debenhams adds to UK retail gloom with new profit warning

A shopper walks past a Debenham's store in central London. The retailer has added to the gloom in the retail sector with a profits warning.
Updated 19 April 2018
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Debenhams adds to UK retail gloom with new profit warning

  • First half underlying pretax profit down 52 percent
  • Finance chief quits for job at Selfridges

Department store group Debenhams added to the grim start to 2018 for Britain’s retail sector, lowering its full-year outlook for the second time in four months and cutting its dividend after a 52 percent slump in first half profit.
Shares in Debenhams fell as much as 13 percent on Thursday, taking its year-on-year plunge to 61 percent.
The 240-year old Debenhams, which delivered the sector’s first profit warning of the year in January, also said Matt Smith, its chief financial officer, was quitting to take up the same role at rival Selfridges.
Debenhams is not alone in finding the going tough. Official UK data showed the biggest quarterly fall in retail sales in a year.
Debenhams’ problems have, however, also been self-inflicted.
“We didn’t help ourselves at Christmas because our approach wasn’t good enough,” CEO Sergio Bucher told reporters. Debenhams said in January it had been forced to cut prices to drive sales of Christmas gifts.
Already this year Toys R Us UK, electricals group Maplin and drinks wholesaler Conviviality have plunged into administration, while fashion retailer New Look and floor coverings firm Carpetright are closing stores.
Rival department store group House of Fraser is seeking rent reductions while market leader John Lewis has cautioned on the outlook.
Bucher, a former Amazon and Inditex executive who joined Debenhams in 2016, is one year into a turnaround plan focused on closing some stores, downsizing or revamping others, cutting promotions and improving online service, while seeking cost savings.
Progress has been hampered by changing shopping habits, a squeeze on UK consumers’ budgets, a shift in spending away from fashion toward holidays and entertainment, as well as intense online competition and bad weather, including snow in March that temporarily shut almost 100 stores.
“The market has remained very volatile and competitive with consumer confidence and the clothing market continuing to fall,” said Bucher.
“The retail market is changing but this is happening faster than we or anybody expected and therefore we need to accelerate our pace of change,” he said.
Outgoing CFO Smith denied his exit showed a lack of confidence in Bucher’s plan. “I was part of developing the plan, it’s a good plan,” he said.
Bucher said progress had been made, pointing to strengthened management, sales growth from digital channels ahead of the market, encouraging returns from new store formats, and partnerships with other retailers.
“It’s not easy from the outside to appreciate the amount and magnitude of change that is happening inside Debenhams,” he said.
Debenhams made an underlying pretax profit of £42.2 million ($59.9 million) in the 26 weeks to March 3, below analysts’ average forecast of £44 million, on revenue down 1.6 percent to £1.65 billion. The interim dividend was cut by 51 percent to 0.5 pence to fund the recovery strategy.
The group is now forecasting a 2017-18 pretax profit at the lower end of analysts’ forecast range of £50-£61 million versus previous guidance of £55-£65 million. It made £95.2 million in 2016-17.
“Our biggest concern remains relevance, Debenhams has lost the customer as the product offer has become tired,” said analysts at Peel Hunt, reiterating their “sell” recommendation.
“The CFO is leaving for Selfridges, investors should follow,” they said.


Search engine Baidu becomes first China firm to join US AI ethics group

Updated 17 October 2018
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Search engine Baidu becomes first China firm to join US AI ethics group

  • The Partnership on AI (PAI), which counts Alphabet Inc’s Google, Apple Inc. and Facebook Inc. as members, is a body that develops ethical guidelines for AI research
  • Baidu’s inclusion in the group comes as Chinese and US companies are looking to ramp up cooperation on AI

BEIJING: Chinese search engine Baidu has become the first Chinese company to join an artificial intelligence (AI) ethics group led by top US tech firms, amid wider political clashes over AI competition between China and the US.
The Partnership on AI (PAI), which counts Alphabet Inc’s Google, Apple Inc. and Facebook Inc. as members, is a body that develops ethical guidelines for AI research, including ensuring research does not violate international conventions or human rights.
Last year China’s industry ministry named Baidu as one of four national AI champions, and the search firm has invested heavily in autonomous driving and deep learning in recent years.
“Baidu’s admission represents the beginning of PAI’s entrance into China. We will continue to add new members in China and around the world as we grow,” said PAI in a statement on Tuesday.

 

Baidu’s inclusion in the group comes as Chinese and US companies are looking to ramp up cooperation on AI, despite a looming political scuffle between the US and China over technology transfers.
Last year China set out a roadmap to become a world leader in AI by 2025, with plans to invest roughly $400 billion in the industry in the coming years.
The ambitions have rankled the US government, which has discussed plans to bolster security reviews of cutting-edge technology, including AI, over fears that China could access technology of strategic military importance.
China’s AI roadmap encourages technology sharing between private, public and military research groups.
Despite the clash, US companies have expanded their AI presence in China while Baidu and other Chinese firms have launched AI research labs in the US.
Last month China’s cyber ministry hosted Google, Amazon Inc. and Microsoft Corp. at its annual AI forum. All three companies have launched AI research labs in China over the past year, despite tightening censorship and data restrictions that limit the companies’ involvement in the market.
At the forum, top government officials stressed that China’s development of AI technology would be ethically conducted, adding that they have plans to retrain workers who lose their jobs to AI.

Decoder

China’s AI roadmap encourages technology sharing between private, public and military research groups.