DEBENHAMS PLC: A Critical Review

ABSTRACT

This report on Debenhams Plc, a UK retailer, seeks to evaluate the strategies used by the company to combat the changes in the industry and the success of the current strategy.  The analytical tools used were a PESTLE analysis, Value Chain and the SAFe framework.  These when applied would give a fairer representation of Debenhams position and the adaptations necessary to maintain the market share.  Critical determinants found are that Debenhams working capital should to be continually evaluated, current online expansions should be intensified, and current in-store structure should be stripped down and personalised.  The findings of this report would add value to retailers entering the market bringing awareness that long term planning is imperative and being market responsive is critical to survival.  It is recognized that the assessment is based on secondary data and the evolutionary nature of a real time market study.

1.   Introduction

Strategy has been defined as the long-term direction of a company (Johnson, Whittington and Scholes, n.d.).  Therefore, taken in context, a company that intends to continue to trade profitably must become strategic throughout all aspects of its management and operational plans as it seeks to achieve its organizational goals.   Deloitte, a multinational service network, evaluated the retail industry’s direction and highlighted the trends of consumer spending for 2018. Deloitte recommended that retailers needed to invest in online activity, refresh core systems, and develop smarter, personalized offers in addition to rethinking the role of their stores (Deloitte United Kingdom, 2018).   This report seeks to assess Debenhams reaction to the changes made in the industry and the suitability of the strategies implemented. 

2.   Company Background: Debenhams PLC

Debenhams PLC was founded in 1778 by William Clark and later partnered with William Debenham to form Clark and Debenham.  In referencing Debenhams website, over the period of two hundred years, Debenhams has broadened its scope to trade both nationally and internationally in two hundred and forty stores in twenty-seven countries.  It has a top five market share in both men and women wear and a top ten market share in children's wear in the United Kingdom.  Debenhams trades in various sectors in the retail market.  Debenhams sells clothes for children, women and men, in addition to beauty products, home accessories, furniture, gifts, toys, electricals, insurance and real estate.  Debenhams profitability can be linked to a strong business model, diversification and brand visibility.

W. Chan Kim and Renée Mauborgne stated that head to head competition would result in all competing for the same goals or market share making the environment harsh and volatile.  (Chan Kim and Mauborgne, 2005). Seeking blue territory through acquisitions, alliances and partnerships, Debenhams sought to build relationships whilst adapting to the ever-changing market trends.  Debenhams Annual Report 2017 reflects on the changes to procedures, markets, products and management approach.  Creating a personalized shopping experience to cater to everyone’s need, both online and in store, shows the company adding value to their service. Re-launching it loyalty scheme and adding status recognition (VIP) encourages return sales.  Brand building in core sectors and new entry segments can open possibilities to a wider buying public.  In house designers bring value, creativity, diversity and quality.  Individuality would be Debenhams unique selling point.  The merchandise mix will also be encompassing other high-end brands like Dolce & Gabbana, Emporio Armani, Tom Ford and Versace.

As Debenhams grows in online sales, data received will determine instore stocking. Debenhams streamlined its handling of stock, making it more cost effective.  No longer sitting in warehouses awaiting shipment, stock is managed through a single view across channels and delivered directly to floors frequently, creating a faster turnover in sales. 

Enhanced Human Resource policies encouraged the retraining of staff to the new mode of operations.  Equal opportunities, staff engagement, apprenticeships and a pension plan secure loyalty while unveiling the talent beneficial to Debenhams.  The commitment to reduce their carbon foot print and provide support to a range of charities through the Debenhams Foundation reflects Debenhams corporate social responsibility in action. 

Desiring to make Debenhams the premier destination for Social Shopping, Debenhams is heavily investing in digital expansion across all platforms.  Mobile access is not limited to the UK, so the expectation of unlimited sales can be realized worldwide via strategic geographic partnerships with Amazon, ASOS and Zalando.   

3.   Vision and Mission

Through extraction of the available data, it can be surmised that Debenhams intends to ‘bring value to its stakeholders’ as it simultaneously reaches for another goal of being the ‘nationwide destination’ in social shopping (Media.corporate-ir.net, 2018 p.11).   The main issue is the vague dissemination to the organizations stakeholders.  This can lead to confusion for both the internal and external customer which would be a deterrent to establishing the direction Debenhams is taking.  It must be noted that adverse conditions, such as climate conditions and internal restructuring, can affect the vision and mission of any entity, but without a conveyance of the management goals, it makes the realization that much harder to achieve.  Flexibility to market changes and timely adaptations are realistically the best option for survival but the strength of the core should remain the same to solidify the position that: Debenhams is here to stay.

4.   The Stakeholder

The key stakeholder in the transactional relationship is the consumer.  The seller must capture and satisfy the consumer’s needs for repeat business to occur.   With many retailers peddling the same or similar products the need to be different is supremely important.  This market in which the trade equation becomes a reality can be volatile and extremely competitive, considerably more so, in a saturated market.  The difference can only be realized via the application of the components of the marketing mix (See Appendix A).  Debenhams marketing mix utilizes the strategies presented with the intent to be easily distinguishable from the company’s peer retailers. To have a successful strategy the customer’s needs must be known.

KPMG Annual Survey also reported findings concerning consumer buying and trends (Home.kpmg.com, 2018).  From this survey, the indication is that the retailer has limited, if any, power beyond its internal policies. The consumer has taken control of the buyer/seller relationship due to the vast array and availability of similar goods and services.  The needs and conditions of sale for the consumers are demands that the retailer must meet in the competitive market (See Appendix B).

Debenhams has met some of the customer’s requirements represented by an increase of digital sales but struggles to do so in store.   Global integration of all races and cultures can affect the change of items for sale.  Diversification into medium to high end ethnic goods in regional area can entice the customer through the doors.  Another area unrepresented is the teen.  Social media continues to be the catalytic agent of main forms of communication for this demographic.  Debenhams has the software, now is the time for opportunity to meet demand as teens do ‘click and play’ to stay engaged.  Also, Debenhams should place greater focus on the senior customer as this group has stronger buying power and more predictable tastes.

5.   Debenhams Strategy

Debenhams business strategy is to offer quality merchandise across multiple product categories via multi-channels.   This would include other brands and services to offer a wider range to choose from.  Debenhams outlines the strategy as such:

            Delivering a compelling customer proposition

            Increasing availability and choice through multi-channels

            Focusing on UK retail

            Expanding the brand internationally

            Investing on operational and organizational effectiveness.

                                                                                            (Debenhams Sustainability, 2018)

Debenhams vision to deliver growth, efficiency and value for the shareholders framed the changes to be made.  In 2017, the new CEO developed a new strategy to capitalize on an emerging trend: Social Shopping via mobile or direct interaction.  Surviving in the retail industry means strategy changes as the market changes backed by the available resources at hand.  Debenhams sought growth through mergers, acquisitions and franchising via Maisons du Monde, Compass Group UK and Blow.  

Debenhams is a multinational company, therefore what works in Australia may not necessarily work in another socio-geographic location as Saudi Arabia.  Recognizing that “adding value” would have a different meaning worldwide, Debenhams places emphasis on its customers in their strategic framework. Debenhams embarked on a mission to get to know their customers buying tastes, cultural needs, social desires and spending habits. Putting people first can transition the view of Debenhams.  Rather than being reactive, Debenhams desires to become proactive in feeding the needs of its customers via the application of the marketing strategy.  The drive now is to ensure that all components are aligned. 

Debenhams internal restructuring of its customer service department changed as the customers became vocal.  Changing from face to face, to self-service kiosks and back to face to face, showed that Debenhams was losing touch with the basic need of every shopper – to be heard.  Sales channels had evolved but the value of the customer’s opinion had not.  Adapting to this would mean a growing pool of human resources and higher labour costs.  Alternatively, internet interaction would require less but the human touch is greatly diminished.  Finding a medium can be a struggle to maintain a valued relationship.   

In analysing Debenhams current position, the following analytical tools were used PESTLE, Porter’s Value Chain and the SAFe framework.  The PESTLE analysis revealed that there were previous market forces that evolved within the past three years that was not accounted for. For example, the UK’s decision to leave BREXIT and the effect it would have on spending, labour and inflation.   Porter’s Value Chain highlighted the value of each layer in achieving the desired outcome.  Within the SAFe framework, the analysis showed the weaknesses in Debenhams strategy (See Appendix C). Goal alignment should be key to an expected outcome.  Here the company should listen to the market and adjust accordingly.

6.   Financial Performance

Leading into the 2017 – 2018 period, Debenhams suffered severe losses due to harsh weather conditions and poor customer turnout.  To prevent aging stock on hand, huge discounts were given to combat this. Debenhams saw a decrease in local sales and share price. Also marked was a rise in international and digital sales.   Debenhams also continued to see a fall in profit from 2010 – 2017 as operational cost rose, expansions continued, and the customer in-store sales lessened (See Appendix D).  Despite market hostility for the same period, group revenue has had incremental increases (See Appendix E).

As Debenhams continued to see share prices drop and field questions about cash flow, a new chief financial officer (CFO) came on board.  This could mean new ideas with a fresh take on finances and keener projections. It should be noted, Debenhams has changed approximately five chief financial officers in the period 2010 – 2018 leading to speculation as to poor financial planning and instability within. 

Magasin Du Nord Denmark, a subsidiary of Debenhams has been placed for sale as insurers coverage was reduced, meaning less working capital available to cover day to day trade.  This sale could raise upwards of two hundred and fifty million pounds.  Debenhams vulnerability emerged as market forces saw Debenhams struggling to maintain its global position.  Cash and debt strapped, to continue Debenhams must secure funding before tapping further into reserves (See Appendix F).

Debenhams tightened its fiscal policy and adjusted by closing unprofitable branches and launching new ones. After issuing its third profit warning, Debenhams look to cut jobs in a bid to cut costs.  Debenhams reaction is as those of its competitors. Morrisons, Tesco, and Sainsbury have all reacted similarly Blow would refuse to commit to any new spending with Debenhams due to its unsteady financial position.  In August 2018, Debenhams entering redundancy talks in a bid to further cut labour costs in the management department.  However, Debenhams issued a statement outlining its current strategy, ‘Our work to create a simplified and consistent structure across these units, reducing complexity and driving efficiency in order to deliver our Debenhams Redesigned strategy, is continuing’ (Stevens, 2018).

7.   Corporate Governance

Debenhams evaluation by an external facilitator reflects their adherence to the UK Corporate Governance Code and is published for ethical transparency.  Shareholder engagement is maintained through meetings, published reports and conveyance of the current corporate strategy.  Non-executive directors are required to receive approval from the Chairman for activities in conflict with their roles.  The congruence of corporate and shareholder long term goals can be realized with this governing framework.  Debenhams should continue to strengthen the adherence to the UK Code for structure and transparency whilst building brand trust.

8.   Risk Management

Risk management is controlled the board who identifies and implements timeframes and authority levels and protocols to diffuse it. Transparency and anti-fraud reporting is encouraged across the company.  These procedures do not eliminate risk but are used to manage the risk as it occurs.  According to the 2017 Annual Report, Debenhams faces the risk of adverse economic condition, the fluctuation of the English pound, systems failures and down time due to this.

It could be said, Debenhams over-reached in its redesigning activities and became vulnerable by slowly reacting to the economic conditions.   The outcome threatened the shrinking operating capital which then exaggerated the risks outlined in the report. Debenhams closure of its stores and staff reduction are reactive measures indicative of an idealistic management’s sluggish response to the realistic environment it operates in.  The company should become more financially prudent and evaluative of all risks management measures.

9.   Conclusion

Debenham has been and will continue to be a strong player in the international arena.  The company’s greatest assets are the strengths of brand quality, brand visibility and financial reserves to weather the current market.   The company’s current strategy of restructuring and redesigning the face of Debenhams is critical to survival. Recommendations from my previous analysis still hold true.  Debenhams should still be wary of overreaching in the company’s activities.  With an economic downturn, increasing salary demands, loss of sales due to social conditions and counterfeiting, Debenhams should take incremental steps rather than bold ones.  Alliances, especially with Amazon, should continue to bolster and maximize their global presence. Debenham should still look to blue territory with a look to invest in both the teen and senior segment. Debenhams should keep seeking avenues to provide value to shareholders and customers, value in processes, procedures and the relationships formed. The company’s operational effectiveness can be realized by building infrastructure that is sustainable through a multi-year investment programme in systems and implementing automation throughout all its stores.  Referring to Debenhams current strategy, with a few modifications in size, operations and financial planning, can realize its goal of being The Social Shopping destination.

12.   REFERENCES

Breo.beds.ac.uk. (2018). [online] Available at: https://breo.beds.ac.uk/webapps/blackboard/content/listContent.jsp?course_id=_61922205_1&content_id=_3115617_1 [Accessed 31 Aug. 2018].

Debenhams Sustainability. (2018). Our business strategy. [online] Available at: http://sustainability.debenhamsplc.com/our-approach/our-business-strategy/ [Accessed 1 Sep. 2018].

Deloitte United Kingdom. (2018). Retail Trends 2018. [online] Available at: https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends.html# [Accessed 24 Aug. 2018].

(GBP), G. (2018). Debenhams revenue 2010-2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/466001/debenhams-revenue-worldwide/ [Accessed 23 Aug. 2018].

GBP), O. (2018). Debenhams operating profit 2010-2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/466004/debenhams-operating-profit/ [Accessed 30 Aug. 2018].

Home.kpmg.com. (2018). [online] Available at: https://home.kpmg.com/content/dam/kpmg/uk/pdf/2018/01/kpmg-annual-retail-survey-2018.pdf [Accessed 24 Aug. 2018]

Kim, W.C and Mauborgne, R., ‘Value innovation: a leap into the blue ocean’, Journal of Business Strategy, vol. 26, no. 4 (2005), pp. 22–28, and Kim, W.C and Mauborgne, R., Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, Harvard Business School Press (2005).

Lauterborn, B. (1990). New Marketing Litany: Four Ps Passé: C-Words Take Over. Advertising Age, 61(41), 26.

Londonstockexchange.com. (2018). DEBENHAMS share price (DEB) - London Stock Exchange. [online] Available at: https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B126KH97GBGBXSSMM.html [Accessed 27 Aug. 2018].

Media.corporate-ir.net. (2018). [online] Available at: http://media.corporate-ir.net/media_files/IROL/19/196805/annual/pdf/Debenhams_2017_Annual_Report.pdf [Accessed 2 Sep. 2018].

McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.

Porter, M. (2008). Competitive Advantage. Riverside: Free Press.

Johnson, G., Whittington, R. and Scholes, K. (n.d.). Fundamentals of strategy.

Stevens, B. (2018). Hundreds of jobs threatened at Debenhams as it launches redundancy consultation - Retail Gazette. [online] Retail Gazette. Available at: https://www.retailgazette.co.uk/blog/2018/08/hundreds-jobs-threatened-debenhams-launches-redundancy-consultation/ [Accessed 29 Aug. 2018].

13.   APPENDICES

APPENDIX A

Marketing Mix

The marketing mix is used to maintain the relationship between the buyer and seller within seven areas. The strategy consists of using the right place with the right product at the right price promoted the right way in the right physical environment backed by the right process and delivered through the right people, can meet and surpass the needs of its target market.  When studied and effectively applied, when marketed effectively, can manipulate the perception of the consumer to the retailer.   Focusing on the main four (McCarthy, J. 1960), it can be seen how the application directly interacts with another sub-group in the marketing mix, the 4Cs (Lauterborn, R. 1990). The product should have customer value.  The price is not the only cost to the consumer, for example when one product is chosen there is a loss incurred by excluding the rest.  This is defined as opportunity cost.  Communication is directly related to how a product is advertised and creates the doorway for the customer relationship to begin.  The customers need for instant gratification has grown exponentially, therefore a major factor is convenience as the gap between desire and possession is shortened. 

Debenhams high end products directly affects customer value in perception and satisfaction.  Market friendly pricing controls the cost to the customer influencing future sales.  Debenhams in stores sales has lessened but the mobile and online sales have grown, showing that convenience has changed the style of purchasing.  Debenhams full listing of all contact methods coupled with continuous media updates are tools to open communication between the company and potential shoppers.  The company’s marketing mix manages to keep Debenhams firmly etched in the customer’s mind.

 APPENDIX B

Consumers Predictions

KPMG Annual Survey listed a few of the consumers recommendations:

·         Brands – online retailing competing strongly against brick and mortar sales.

·         Power – the balance of power has shifted, and consumers control the market.

·         Corporate responsibility – consumers awareness is requiring companies go green to ensure a future for their families.

·         Loyalty – a shifting ideology in a competitive market.  Consumers are seeking those that can provide instant gratification consistently.

·         Pricing – Seasonal or individual, consumers are seeking out deals that deliver more for their money.  Holding out for discounts.

·         Leisure shopping – Smartphones are fast becoming the go to shopping guide with the availability to shop anywhere, anytime according to the consumers schedule.

·         Brexit – Economic fears as the UK left the bloc.  This continues to affect spending.

·         Collaborations – Partnerships, alliances and media platforms continue to dictate service quality.

(Home.kpmg.com, 2018)

                                                   APPENDIX C

Analytical Tools

C.1   PESTLE

The evaluation of the external market is crucial to any entity desiring to internationalize its goods and services.

POLITICAL			Tighter regulations on food stores
			UK vote to leave BREXIT
			UK Corporate Code
			Rising food costs
			Rising fuel costs
			Rising labour costs
			Operational taxes
			International taxes
ECONOMIC			Higher inflation Downturn in economy
			Reduced interest cover by insurers
			Volatile retail market
			Lower discretionary income
			Lower in-house sales
			High turnover of management staff
			Loss of revenue due to redesign of stores
			Staff retraining
SOCIAL			Shift to online shopping
			Lower instore buying
			Customer complaints Exodus of EU cheaper labour
TECHNOLOGY			Competing Internet sales
			Cost of internet monitoring
			Cost of integrating internet technology Website down time
LEGAL			Salary adjustment for previous non-payment
			Minimum wage
			International labour laws
			Counterfeit products in direct competition
ENVIRONMENT			Corporate social responsibility
			Weather conditions

Here it could be seen Debenhams faced threats from every sector of the analysis.  The options to fight the forces controlling the market would be a grim prognosis for Debenhams.  UK decision to leave BREXIT directly affected Debenhams activity for expansion.  Job insecurity and a slow economy saw Debenhams continually adjusting to a rapidly declining discretionary income.

C.2  Porter’s Value Chain

The building of an effective strategy starts with all facets of the service.  Therefore, the primary and supportive services must compliment and support each other.  Competitive advantage cannot be understood by looking at a firm in total. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product. Each of these activities can contribute to a firm's relative cost position and create a basis for differentiation. (Porter, 1985:33; Michail, 2018)

(Porter, 2008)

Listed is a brief overview of Debenhams application of the value chain.

Inbound Logistics                                  Real-time reception from supplier to customer.   

Operations                                            Sources goods and services structured by ethical practices.  

Outbound logistics                                 Stock is sent directly to the stores for faster sale and less storage

Marketing and Sales                              Merchandise is marketed and sold via all media with a wider reach online.  Gift cards and vouchers.  Full refunds.  High-end brand.

Services                                               Interactive website.  Contact can be made via email, phone, and letter. International listing and hours of operation.  Enhanced customer service.  Customer feedback form.

Firm Infrastructure                                 Board appointed members. Quality control procedures.  Annual report.  Externally audited for transparency.

Human Resource Management               Training for all staff.  Open door policies.  Adherence to global human rights policies.  Adherence to UK labour laws.  Dismissing staff if necessary due to economic activity.  Staff engagement via an annual report.

Technology Development                       Real-time stock check via online activity.  Self-serve kiosk.  Growing online sales.  Social spending via phone activity.  Click and collect at nearest location.   Can track items.  Data mining to provide tailor-made services.

Procurement                                          Franchises, mergers and alliance to bring greater value to customer and shareholders.

The value chain at Debenhams is both traditional and virtual.  With the adoption of the

combined value chain, Debenhams can provide superior goods and services comparative

to the retail market.

C.3   SAFe Framework

The SAFe framework is a series of techniques to evaluate the financial and non-financial options available to a company.  (Breo.beds.ac.uk, 2018)   When applied to Debenhams some of these options were explored.

S: Suitability – this assess which strategies would be best to address the current position of a company.  When Debenham was faced with declining profits coupled with massive ongoing restructuring, there were options available to address this.  Job cuts, management restructuring, sale of assets or share options were a few.  The strategy adopted would address the urgency of the need for the capital and for what purpose.  In Debenhams case, this would be downsizing.  Share options would raise capital over a period whereas job cuts and smaller locations would immediately affect Debenhams financial position.

A: Acceptability – this measures the whether the outcomes of a strategy align with stakeholder’s expectations.  This can be assessed by the risk, return and stakeholder reactions. 

Risk – Risk defined by Debenham would be the extensive restructuring of all areas of its portfolio while maintaining their profitability in an increasingly volatile market.

Return - The return on investment can be measured by various ratios in the accounting equation.  In this case, Debenhams earnings per share had decreased because share price had also decreased.  Indicating lower return on investment.

Stakeholders reactions – Blow has refused to extend further coverage to Debenhams and is currently seeking to end the relationship and form another alliance with a more stable company.

Fe: Feasibility – Debenhams strategy has been hampered by a loss of sales and a higher operating cost therefore restricting the availability of funds to meet preset deadlines.  Adjusting to meet the expectations of the shareholders would see Debenhams carrying out major retrenchment, proposed sales of assets and closing stores across the UK and Denmark.

APPENDIX D

Debenhams Historical Operating Profit

The statistic represents the decrease in operating profit for Debenhams between the periods 2010 to 2017.  This would show that Debenhams debts were gradually increasing as sales were declining with less liquid capital for day to day activity (GBP), 2018)  Debenhams perception of the customers expected spending was grossly overrated and struggled to adjust as restructuring continued.

APPENDIX E

Debenhams Historical Revenue

(GBP), 2018)

This is representative of all revenue for the same period.  While in-store sales declined in the UK, international and online sales continued to grow, bolstering their position.  Singularly, Magasin Du Nord had recorded a profit of 26.6m pounds.

APPENDIX F

Debenhams Key Performance Indicators

Key Fundamentals	31-Aug-13	30-Aug-14	29-Aug-15	03-Sep-16	02-Sep-17
Revenue (£ m)	2282.20	2312.70	2322.70	2341.70	2335.00
Pre-Tax (£ m)	154.00	105.80	113.50	105.80	59.00
EPS	10.20p	7.10p	7.60p	7.00p	4.00p
PE	10.50	9.36	9.96	8.85	10.06
PEG	2.57	-0.31	1.41	-0.92	-0.24
EPS Growth	4.08%	-30.39%	7.04%	-9.63%	-41.76%
Dividend Cover	3.00	2.09	2.24	2.04	1.17
Dividend Yield	3.17%	5.12%	4.49%	5.53%	8.51%

(The London Stock Exchange, 2018)

Revenue has increased steadily from 2013 to 2016 but here was a marginal decrease in 2017 of 0.2%.  However, the pre-tax profits were extremely unstable, exhibiting significant decreases, even during periods of small revenue growth.  This is an indication of higher operational factors and depreciation in currency.  That means that the local sales were much more profitable than the foreign and online sales. The company, therefore, needs to examine the cost structure of the online and international sales to determine why the associated cost is much higher than the cost of the local sales.

Earnings per share (EPS) has fallen which could mean that with the loss of sales, confidence in Debenhams has also been reduced. 

The price per earning (PE) has remained stable. In periods of decreased earning, a constant PE figure indicates that the share has declined in a commensurate pattern with decreased earnings.  Debenhams has been in existence for over 200 years and is considered out of the growth phase.  Only with the application of other evaluative methods would its true value been shown.

Price per earning / growth (PEG) shows that Debenhams stock is undervalued compared to market standards. 

The earnings per share growth (EPS Growth) confirm that Debenhams is losing money and currently struggling to stay afloat. 

The Dividend Cover establishes that Debenhams is not as profitable as the previous years and have a lower level of retained earnings for internal investment.  The significant decline of dividend cover indicates that the company is paying out a higher percentage of its after-tax profits in dividends.  This is not a healthy situation and points to the difficulty of sustaining this level of dividend pay-out as pre-tax profits are in decline.  While it may not have touched its reserves, it may have to as all its earnings may be disbursed into dividends.  

Dividend yield compares the dividend received per share with the current market price of the share.  Considering the decreased share price and decreasing dividend cover, meaning that a higher percentage of the retained profit is distributed as dividends it is expected that the dividend yield would increase as is recorded here. Under normal circumstances a high dividend yield is a positive indication that the dividends paid out by the company is a good return for the shareholder’s investment in the company’s shares, however in this case the low dividend cover must be taken into consideration. When this is done it is seen that the high dividend yield may not be sustainable because of the declining earnings capacity of the company.