Debenhams plans to axe up to 50 underperforming stores in a bid to turn around its ailing fortunes.
The stores will be closed over the next five years, as part of a review of Debenhams’ store portfolio and overall strategy.
The department store group announced a £491.5m statutory pre-tax loss for the year to 1 September 2018 – down from a £59m profit the previous year. EBITDA fell by 27.5% to £157.3m. Underlying profit before tax more than halved, dropping 65.1% to £33.2m.
Profits took a hit as a result of a £12.3m investment in the Debenhams Redesigned strategy, and £512.4m of exceptional writedowns relating to “impairment of historic goodwill relating to the private equity transaction in 2003, store impairment and IT systems”.
Like-for-like sales were down by 2.3%, and Debenhams described beauty and fashion as “weak” areas. Gross transaction value for the year also fell by 1.8% to £2.9bn.
Debenhams announced an additional £50m of planned cost savings, and a target of £130m in cash savings by 2020. It said capital expenditure for the coming year will be “approximately half the level of FY2018” at £70m.
In addition to store closures, Debenhams will also invest in optimising its remaining store portfolio, rolling out the Debenhams Redesigned strategy to up to 100 stores, and introducing a new lower-cost approach to 20 other locations.
Commenting on the results, CEO Sergio Bucher said: “It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.
“Working with our new CFO Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline, and prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time.
“Our transformation strategy is gaining traction, with positive results from new product and new formats, general acclaim for our store of the future in Watford and digital growth that is outpacing the market. With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future.”