Debenhams to calm investors
DEBENHAMS sought to reassure investors over its finances after its shares hit a record low on fears of a restructuring which could lead to more store closures.
The department store group, which has issued three profit warnings this year, put out a stock market announcement confirming it expects to make annual pre-tax profit of £33million, within the current market range.
Its year-end debt is expected to be about £320million, in line with guidance and providing “significant headroom” on its £520million borrowing facilities.
But it is also working with advisers on longer term options, which could include a company voluntary arrangement (CVA), a process enabling it to close stores or reduce rents.
Despite a partial recovery from earlier losses, its shares closed 10 per cent or 1¼p lower at 11½p, valuing the company at £141million.
Chief executive Sergio Bucher said: “The market environment remains challenging and underlying trends deteriorated through the summer months.
“Nevertheless the product and format improvements we have tested are gaining traction and we are ready to scale up some of our strategic activity. Having put in place a leaner operational structure and strong leadership team, and taken action to strengthen our financial position, we are equipped to navigate these market conditions and take advantage of any trading opportunities.”
Under his turnaround plan, Debenhams is looking to close up to 10 of its 165 stores and downsize 30, as well as reducing promotions and boosting its online service.
It recently said it would axe up to 90 staff at its fashion and home departments, adding to the loss of 320 store management roles announced in February.
Chairman Sir Ian Cheshire said: “The board continues to work with its advisers on longer term options, which include strengthening our balance sheet and reviewing non-core assets.
“This activity is in order to maximise value for shareholders and protect other stakeholders, including our employees.”
Some analysts have suggested Mike Ashley’s Sports Direct, which owns nearly 30 per cent of Debenhams, could swoop to combine the business with its recently acquired House of Fraser.