Debenhams in profit alert as sales continue to slide

Image copyright
Getty Images

Debenhams says it will not be able to meet the profits forecast it made just two months ago.

In a trading update, the struggling chain said its forecast made on 10 January that it was on track to deliver profits in line with market expectations was “no longer valid”.

It said like-for-like sales for the 26 weeks to 2 March were down 5.3%.

Debenhams said talks with stakeholders to put it on a firmer footing were “continuing constructively”.

The retailer said it would provide a further update with its interim results statement.

Sergio Bucher, the chief executive of Debenhams, 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.”

He said the business would need the help of landlords and local authorities to address rent and rate levels and lease commitments.

A month ago, the department store chain said it had been granted a cash injection of £40m to buy it extra time as it battled to secure a longer-term deal with lenders.

At the time, the company called it a “first step” towards a sustainable future.

The firm – which issued three profit warnings last year – is in talks with lenders over renegotiating its debts.

It is also reportedly trying to accelerate plans to close stores and is expected to close around 20 outlets this year.

High Street retailers have been under increasing pressure as more people choose to shop online and visit stores less.

Debenhams – which has 165 stores and employs about 25,000 people – reported a record pre-tax loss of £491.5m last year and said more recently that sales had fallen sharply over Christmas.

Last year, rival department store chain House of Fraser fell into administration before Mike Ashley, the billionaire Sports Direct founder, bought the department store’s assets for £90m.

Mr Ashley is also a major shareholder in Debenhams, with a 29% stake, and he recently joined together with investor Landmark Group to vote the retailer’s chairman and chief executive off the board.

Mr Bucher is chief executive of Debenhams but no longer sits on the board.