Debenhams is in trouble. But the board could yet fend off Ashley’s advances
Last week, controversial sportswear tycoon Mike Ashley rolled another grenade into the Debenhams boardroom, deftly using his near-30% shareholding in the company to oust the chairman and chief executive at its annual meeting. So what now for the struggling department store, which has seen its share price drop 86% in the last year?
Erstwhile chairman Sir Ian Cheshire has quit but chief executive Sergio Bucher, a former Amazon executive, is apparently hanging on despite losing his seat on the board.
Ashley insists it is not in his interests for Debenhams to fail – his Sports Direct has already lost more than £100m on its investment in the company’s shares. But then why pull the rug out from under the management team? It looks like Ashley is trying to win control of the business on the cheap.
Given that there was such a threat at their door, investors and the board were caught napping. Less than 70% of shareholders bothered to cast the votes that could have saved Cheshire and Bucher from humiliation.
Interim chairman Terry Duddy, a retail veteran whose last job was running the now-defunct Home Retail Group, which owned Argos and Homebase, now takes on the Herculean task of stabilising Debenhams’ finances. It’s a big job, with debts of nearly £300m to be refinanced and a need for a fresh injection of funds to complete its turnaround plans.
Some argue shutting a number of its 165 department stores is the answer, via an insolvency process known as a company voluntary arrangement, but that is a hard trick for a quoted company that is not at death’s door to pull off. Debenhams is still profitable, for the time being anyway.
No one wants Debenhams – which employs 20,000 staff across the country – to become another high street statistic, but Duddy and co need to convince its lenders, suppliers and shoppers that it has a raison d’etre – and outsmart Ashley.