Debenhams chairman Sir Ian Cheshire has warned of a “structural shift” hitting retail business models as shoppers move online – but insisted the department store format was not “dead” and would evolve into a 21st century experience comprising both online channels and physical stores.

The High Street executive was speaking to the BBC Today programme in an attempt to reassure investors and explain the company’s strategy following a 17 per cent drop in the Debenhams share price on Monday.

The company confirmed over the weekend that auditing firm KPMG had been called in to help steer it back to growth by exploring plans for a possible restructure, including the potential option of a Company Voluntary Arrangement (CVA).

Speaking of tumultuous trading conditions for department stores this year, which have seen Marks and Spencer announce plans to close 100 stores and House of Fraser enter administration, Sir Ian described a “year of upheaval”.

He highlighted “the fact that one of our major competitors House of Fraser has gone bust and has been rescued, the famous John Lewis partnership declaring they won’t make any profit this year”, adding that “what is shows is there is obviously structural change going on and capacity will leave the market”.

However, whilst he admitted this shift would create “winners and losers”, Sir Ian predicted that there would still be a market for physical retail in the high end and luxury sectors, which he called “the Selfridges of the High Street which bring newness and fashion and beauty”.

Asked about analyst forecasts of the impending death of the High Street, he said “I think if you don’t update the department store then it would be dead”. But, he highlighted the emergence of a “21st century department store” which straddles both in store and online channels.

Sir Ian said there was “a lot of research with customers showing they want the social aspect of shopping, the social aspect of shopping now includes digital social media”.

He said Debenhams was responding to changing consumer demands with an omnichannel mix, including an online beauty community which launched on Monday.

“All the indications are a large bunch of shoppers who would love to do fashion beauty and home in a way that is a mix of online and offline,” he said.

“The challenge for existing retailers is that they have to take an old business model in the shape of their costs and reinvent it for the future and that is not something you do overnight.”

Speaking to the Today programme, Sir Ian sought to quash a “circus” of speculation regarding the company’s financial future and wanted to reassure investors, insisting “we’re not insolvent”.

In a trading statement to the London Stock Exchange rushed out yesterday, the company said it expected profits to be within the market range of £31m to £36.5 million, falling short of the company’s previous guidance of £35 million to £40 million in June.

Sir Ian confirmed that the retailer was planning store closures following its announcement last year that 10 of its 165 stores may have to close over the next five years, with two stores already shuttered and eight remaining stores under review.

He said the company was working through what is the “appropriate mix” with regards to the future of its stores.

However, he denied that Debenhams was actively was actively driving an insolvency process such as a CVA with KPMG, describing the speculation as “simply not true”.

He explained: "If that's the right thing for the company and our broader stakeholders then obviously that's an option, but the implication was we were about to do it and that... our trading had somehow collapsed.”

He said that the company was instead looking at “every option in the longer term” to turn around its performance and again hit back at media reports.

“The only analogy I can have to it is like having a bunch of nosy neighbours watching your house. Somebody sees somebody in a suit going into a room. The second person concludes it's a doctor, the third person concludes it's an undertaker and by the time it gets to the end of the day you've got cause of death and everyone's looking forward to the funeral,” he said.

Share Story: