Belfast Telegraph

Shares at Debenhams plunge by 17% as restructuring plan is weighed up

By Margaret Canning and PA

Department store chain Debenhams, which has five shops and around 300 staff in Northern Ireland, may consider closing some of its stores after calling in accountants to assess its options.

The move to instruct KPMG to help draft emergency plans to secure its future is another potential blow to retail here.

Debenhams is the anchor tenant in Belfast's CastleCourt shopping centre, yards away from the scene of the Primark fire, which gutted the historic Bank Buildings two weeks ago.

But it is just outside a cordon which has taped off a total of 14 traders close to Primark, though fashion chain retailer DV8 is moving to a temporary unit in CastleCourt from its Castle Place home.

Debenhams is also a major trader in Newry's Quays shopping centre, Craigavon's Rushmere, Ballymena's Fairhill and in Londonderry's Foyleside.

Shares plunged 17% after KPMG was called in to help draft emergency plans to save the troubled retailer.

But Debenhams said: "We have no announcements to make on any store closures in our estate.

"Like all companies, Debenhams frequently works with different advisers on various projects in the normal course of business."

The department store is said to be considering a list of options including a company voluntary agreement (CVA), a controversial insolvency procedure used by struggling firms to shut under-performing shops.

The company has brought in KPMG to help draw up the turnaround plans, according to the Sunday Telegraph, which first reported the news.

If Debenhams charges ahead with a CVA, it would join a raft of retailers including New Look, Carpetright and Mothercare, who have opted for the restructuring tool despite anger from landlords who have argued it leaves them out of pocket.

House of Fraser - the anchor tenant in Victoria Square shopping centre - planned to enter a CVA earlier this year but was then sold to Sports Direct tycoon Mike Ashley.

The news sent shares down more than 17%.

Debenhams later issued a trading update in reaction to media reports, saying it expects full-year pre-tax profits of around £33m before exceptional items, which is within the current market range of £31m to £36.5m.

Underlying earnings are forecast to come in at £157m.

Net debt is to be approximately £320m.

Debenhams has made assurances that it has continued to strengthen its financial position to ensure flexibility amid "volatile market trading conditions".

Chief executive Sergio Bucher said: "The market environment remains challenging and underlying trends deteriorated through the summer months.

"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 (selling season).

"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," he added.

Chairman Ian Cheshire reiterated that the board is continuing to work with its advisers "on longer term options".

Belfast Telegraph

Weekly Business Digest Newsletter

This week's business news headlines, directly to your inbox every Tuesday.