Debenhams rushes out statement to reassure investors after shares plummet
Debenhams says its profit this year will meet forecasts, as it rushed out a statement to try and reassure investors after the shares fell 16%. It came after the retailer confirmed on Sunday it had appointed consultancy KPMG to help improve its performance.
Debenhams said on Monday KPMG would help “maximise value for shareholders and protect other stakeholders”. Pre-tax profit will be about £33m, in line with the downgraded profit forecast the chain gave in June.
Debenhams said net debt would be about £320m, also in line with forecasts, and giving it “significant headroom” on the £520m it was permitted to borrow under current loan agreements.
Chief executive Sergio Bucher said the market environment remains “challenging and underlying trends deteriorated through the summer months”.
On Sunday, it emerged that Debenhams had brought in advisers from KPMG to assess a number of options to improve the fortunes of the department store chain.
The retailer is in the midst of a turnaround plan designed to cut costs and boost sales.
Industry insiders say the firm and KPMG are looking at a number of potential options, including a company voluntary arrangement (CVA), but it is just one possible measure under consideration.
A CVA is a form of insolvency proceedings that can be used to close stores and renegotiate rents. Debenhams has issued three profit warnings this year, and has lost two-thirds of its share price value since January.
As part of its cost cutting, Debenhams said in August that 80 to 90 jobs at its headquarters would be shed. That followed a February announcement it was planning to cut 320 store management jobs.
The business is also looking at raising cash by selling off its Scandinavian department store chain Magasin du Nord for as much as £200m.
It is a troubled time for traditional retailers, with House of Fraser entering administration and Marks and Spencer saying it intends to close 100 shops.
However, given the fact that very few of its 170 stores are actually loss-making, Debenhams will want to look at all its options before making any decisions about reducing the size of its estate.
Mr Bucher, who joined Debenhams in 2016, aims to put more emphasis on food and beauty and improve the firm’s online platform.
Sports Direct boss Mike Ashley, who bought House of Fraser out of administration and who owns just under 30% of Debenhams, is believed to be watching the latest developments closely.