Debenhams fears raised as bosses plan to 'axe third of stores'
Struggling department store Debenhams is preparing a radical overhaul of its 200-year-old business that could see it close some of its stores.
The company, which announces its annual results on Thursday, is understood to have identified around a third of its 166 stores which could face possible closure.
Debenhams has stores in Wolverhampton, Walsall, Merry Hill, Kidderminster, Lichfield and at the Bullring in Birmingham.
It is also understood to be preparing a significant write-down of its goodwill – the way companies account for their inherent value – that would result in a one-off charge of several hundred millions of pounds.
The ailing department store, which has posted a string of profit warnings this year, is seeking to generate around £100 million in savings. Scrapping the dividend will save the retailer about £30m.
Managers are also weighing up proposals to save £70m by reducing capital expenditure.
The extent of Debenhams’ store closures will depend on negotiations with landlords.
It is thought executives believe the chain could shrink to around 100 outlets over the coming years.
The restructuring, set to be outlined alongside Debenhams’ results, follows the arrival of Rachel Osborne as finance director last month.
She is likely to emphasise that any write-down relates to non-cash items only and is not a reflection of recent overall performance.
Debenhams is battling with expensive leases signed by previous management in more buoyant retail times.
In a letter written last week to property industry magazine Estates Gazette, Debenhams chief executive Sergio Bucher said: “After our people, property is our biggest cost and, right now, it is our biggest challenge.
“While almost all of our 166 UK stores are profitable today, extrapolate current market trends three to five years forward and that picture is going to change.”
City sources said the retailer is also looking to clean up its balance sheet after suggestions from associates of Mike Ashley, the boss of Sports Direct.
Ashley’s team reportedly raised concerns several months ago about the £820million of ‘goodwill’ which is accounted for on Debenhams’ balance sheet, but which is now expected to be significantly reduced. That could take it into the red on an accounting basis.
