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Debenhams considers radical restructuring
September 12, 2018
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LONDON: Struggling British department store chain Debenhams is reviewing its options, including a possible legal procedure that could see it close more stores, it said.

Shares in the retailer, which has issued three profit warnings this year, plunged to a new low after it widened the remit of adviser KPMG to include “longer-term options” such as a possible Company Voluntary Arrangement (CVA).

CVAs allow retailers to avoid insolvency or administration by offloading unwanted stores and securing reduced rents on others. They have been adopted by British groups including fashion chain New Look, floor coverings retailer Carpetright , mother-and-baby goods company Mothercare and most recently home improvements chain Homebase.

Debenhams shares plunged as much as 19.5 per cent to a new low of 10.34 pence on the news, despite the company saying it would meet profit and debt forecasts for its 2017-18 fiscal year

“The board continues to work with its advisers on longer term options, which include strengthening our balance sheet and reviewing non-core assets,” said Chairman Ian Cheshire.

“This activity is in order to maximise value for shareholders and protect other stakeholders, including our employees.” Debenhams, which employs around 27,000 peopl globally, said in June it might sell non-core assets, including its Danish business, to bolster its finances and in July denied it was facing a cash crisis over supplier insurance.

The group is in the second year of a turnaround plan under Chief Executive Sergio Bucher, a former Amazon executive, Focused on closing up to 10 stores, downsizing 30 others and renegotiating leases and rents on 25 stores up for renewal over the next five years. It is also trying to cut promotions and improve its online service.

However, progress has been hampered by a squeeze on UK consumers’ budgets, a shift in spending away from fashion towards holidays and entertainment, and intense online competition.

Those trends have particularly damaged the department store sector. BHS went bust in 2016, House of Fraser was bought out of administration last month by Mike Ashley’s Sports Direct and even market leader John Lewis has warned on profit.

Reuters

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