Now vultures circle around Debenhams
Crisis team to attempt rescue House of Fraser merger rumours £16m wiped off firm’s value
DEBENHAMS was plunged into turmoil last night after £15.9m was wiped off its value and shortsellers swooped in to bet against the retailer.
Shares fell more than 10pc, or 1.3p, to 11.5p amid reports it is considering a restructuring plan that could involve axing some of its 165 stores from the High Street.
Debenhams is the second most-shorted stock in London, behind Pets At Home, as hedge funds, betting the share price will fall, pile in.
Those gambling on further price drops, including Odey Asset Management, UBS Asset Management and Blackrock Investment Management, have a combined 11.2pc stake in Debenhams.
Experts warned that Debs’s deteriorating value left it exposed to a takeover from tracksuit tycoon Mike Ashley, who owns a 29.7pc stake. The Sports Direct boss plucked House of Fraser out of administration for £90m last month but has angered suppliers by refusing to pay debts worth hundreds of millions racked up by the department store.
A deal with Debs would make Ashley the dominant figure in department store retailing. Neil Wilson, analyst at trading platform Markets, said: ‘The rationale for combining the two to create the House of Debenhams is compelling enough.
‘Combining the two businesses, reducing overheads and at a stroke removing a key leg of competition, seems like the only viable solution for the two ailing department stores.
‘The fact is the market is screaming for restructuring, and consolidation looks a sensible route to take.’
Debenhams has issued three profit warnings since January. It has identified ten stores for possible closure over the next five years and is looking at reducing the size of 30 others.
Meanwhile the leases on 25 sites are due to expire over the period so they can be easily shut down.
The store is understood to have drafted in advisers from KPMG to explore restructuring options, including a company voluntary arrangement, a type of insolvency procedure which has been adopted by House of Fraser, New Look, Homebase and a string of restaurant chains in recent months.
Around 50,000 retail jobs have already been lost since the start of 2018 as the High Street has spiralled into crisis.
About 61,000 stores have closed in the past five years as shops battle with soaring costs combined with an onslaught from online retailers such as Amazon.
Rising business rates have made the situation even worse, with Debenhams forced to fork out £80m annually to the taxman.
In a London Stock Exchange announcement after shares fell yesterday, Debenhams refused to address reports of store closures. Instead it repeated that it expects full-year profits of around £33m, compared with £95.2m a year earlier. Chief executive Sergio Bucher said the retail market remains ‘challenging’ but that the firm is ‘well equipped’ to deal with the turbulent conditions.