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Debenhams defends its financial position

Debenhams has defended its financial position and said the early weeks of new season trade have been more positive, following a turbulent summer.

It comes after the department store chain acknowledged it is working with advisers from KPMG to explore restructuring options that could include a potential company voluntary arrangement (CVA).

Drapers understands that other prospective options include renegotiating leases on the 25 stores up for renewal over the next five years and working with landlords to reduce the size of up to 30 shops.

The retailer said it expects to report pre-exceptional pre-tax profits of around £33m for its 2018 financial year, when it issues preliminary results on 25 October. The figure is within its current market range of £31m and £36.5m, it said.

EBITDA is expected to be around £157m.

The retailer anticipates year end net debt will be approximately £320m, in line with guidance, and points out significant headroom on its current £520m medium-term facilities.

Chief executive Sergio Bucher acknowledged that the market environment remains challenging and said underlying trends deteriorated throughout the summer.

“Nevertheless, the product and format improvements we have tested are gaining traction, and we are ready to scale up some of our strategic activity ahead of peak,” he said. “Having put in place a leaner operational structure and strong leadership team, and taken action to strengthen our financial position, we are well equipped to navigate these market conditions and take advantage of any trading opportunities that emerge.”

Chairman Sir Ian Cheshire confirmed that the business is working with advisers on longer-term options, which include strengthening its balance sheet and reviewing “non-core assets”: “This activity is in order to maximise value for shareholders and protect other stakeholders, including our employees,” he said.


Readers' comments (3)

  • Debenhams management believe they will turn things around. It’s a failing model. By the time they get the tanker turning, new blood will have their customers.

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  • If Debenhams cannot convince markets as to its future then it could be déjà vu House of Fraser for fashion brands, suppliers, and concession holders.
    Stephen Sidkin
    Fashion Law Group
    Fox Williams LLP

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  • How are brands going to react to the chaos? Independents cannot be expected to take up the slack - and some of those will be gone in 2019 - so will this push brands ever further to a fully integrated model?

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