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Fresh profit warning at Debenhams

Debenhams has said it will no longer be able to make the profits it forecast for its full year, following increased financing costs and continuing “trade headwinds”.   

The department store today announced that its 10 January statement, which said it would deliver full-year profits in line with market expectations, “is no longer valid”.

The trading update clarified: “Further to our announcement of 12 February regarding the additional £40m bridge facility, discussions with stakeholders have now progressed to include options to restructure our balance sheet in order to address our future funding requirements, and are continuing constructively.

“While trading headwinds have moderated in recent weeks, this process is likely to be disruptive to our business in the coming months. Taken together with macro-economic uncertainties and increased financing costs as a result of additional working capital needs, this means that the group’s statement made on 10 January that we were ‘on track to deliver current year profits in line with market expectations’ is no longer valid. We will provide a further update with our interim results announcement.”

Group gross transaction value for the 26 weeks to 2 March declined 5.4%, and the like-for-like fall was 5.3%. UK sales were down 6% and international sales fell 2.3%. Digital sales grew by 2% across the 26 weeks.

Chief executive Sergio Bucher said: “We are making good progress with our stakeholder discussions to put the business on a firm footing for the future. We still expect that this process will lead to around 50 stores closing in the medium term.

“Our priority is to secure the best outcome for the business and all our stakeholders, while minimising the number of store closures and job losses. To do this, as we have said before, we will need the support of both landlords and local authorities to address our rents, rates and lease commitments. I would like to thank our staff – and all our stakeholders – for their continued support through this period, as we work to deliver a sustainable future for the company.”

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Readers' comments (4)

  • No surprises here as this statement sounds like verbal quicksand.

    Why should Landlords and Local Authorities help a failing - and arguably doomed - business? Debenhams should be big enough to admit their failures and sort their own mess out.

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  • I agree with the last readers comments, and at the same time why should they help House of Fraser as well, what councils and local authorities should be doing is helping the small independent retailer because that is where the future lies in the next 5 to 10 years.
    The department store model does not work any more.

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  • darren hoggett

    A pretty hopeless statement from Debenhams, full of corporate jargon and completely lacking any personal responsibility for their own failings. Like an elephant entering the 100 metres, it is running a race it cannot possibly win.

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  • It would be more reassuring if Sergio B actually told the truth. His statement is all hot air and spin. He keeps citing Li & Fung as the saviour. The only upside to the L&F deal is that Debenhams could reduce the fixed costs of the offshore offices. The prices Debenhams will then have to pay for the goods will be higher than they are currently paying. The only way L&F could potentially improve the prices is to drop the quality. It needs to be remembered that L&F were always there as an option to supply Debenhams but could never compete on price and quality hence got next to no business.
    If one looks at the actual deal with L&F the increased cost prices offset by the reduced fixed cost of the offices Debenhams will still
    make a nett loss. Only winner is a L&F. The other key factor on why Debenhams engaged in this L&F deal is that they are willing to supply Debenhams whereas many of the core suppliers and factories are running for the hills due to the risk. This is a really important factor.
    Further to this Sergio states the new L&F ranges will be in this season. No one within Debenhams has a clue what he is referring to - all smoke and mirrors to mask the total underperformance of Debenhams.

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