Debenhams Hits Suppliers With 'Santa Tax'

Debenhams has told suppliers they will be paid 2.5% less for their goods to fund expansion plans - just eight days before Christmas.

The department store wrote to key suppliers of its own-brand wares explaining they would take the money from their accounts, without negotiation.

The move has been described by some as a "Santa tax".

Finance chief Simon Herrick wrote to suppliers telling them that they had to contribute to modernisation plans.

He said: "As we will mutually benefit from the growth of Debenhams we are now seeking a contribution from our suppliers to support our commitment to on-going investment.

Debenhams reported a small fall in profts in August

He said this would include: "A single sum contribution on all outstanding payments on your account at close December 17. An additional discount of 2.5% applied to all open orders on our system at close on December 17.

"This is a contribution and not a permanent amendment to your trading terms with Debenhams."

The firm denied that it was an attempt to boost poor Christmas trading, adding: "We have asked suppliers for a contribution to support our commitment to ongoing investment in the business."

Debenhams' chief executive Michael Sharp has been facing fierce competition from rivals as consumers cut back spending on all but the most essential of items.

The modernisation programme has included a £25m facelift for London's Oxford Street branch but this has so far failed to improve the chain's financial performance.

The company reported a 2.7% fall in pre-tax profits to £154m in the year to the end of August.

Debenhams is planning to open 14 new stores over the next four years.

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