Home Stock & Shares Debenhams shares plunge amid another profit warning

Debenhams shares plunge amid another profit warning

by Jonathan Adams
Debenhams shares

Shares of Debenhams were down as much as 12 per cent on Tuesday as the retailer issued fourth profit warning due to poor sales

Debenhams has issued another profit warning due to poor sales, sending shares down as much as 12 per cent on Tuesday.

The retailer made an unscheduled trading update to clarify that a statement in January claiming the company was on track to deliver results in line with market expectations is “no longer valid”.

In February, Debenhams received a £40m cash injection from lenders, allowing it to pursue long-term refinancing.

However, on Tuesday the group said “this process is likely to be disruptive to our business in the coming months”, resulting in the latest profit warning.

Meanwhile, like-for-like sales in the first 18 weeks of the financial year dropped by 5.7 per cent, with UK sales down 6.2 per cent.

Chief Executive of Debenhams, Sergio Bucher said they are making good progress with stakeholder discussions to put the business on a firm footing for the future. They still expect that this process will lead to around 50 stores closing in the medium term.

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

Debenhams has been trying to cut costs in a bid to stem losses, and last year announced plans to close 50 stores, putting thousands of jobs at risk.

Senior analyst at Hargreaves Lansdown, Laith Khalaf said Debenhams is on the ropes at the moment, and continued tough trading conditions on the UK high street have delivered yet another blow to the ailing retailer. With less money coming through the door, Debenhams is going to have to rely more on debt to fund its operations, and that adds further financial pressure on the company. It is not known quite how badly profits will be hit as yet, but the fact Debenhams has ushered out an unscheduled trading statement tells that its forthcoming interim results aren’t going to make for pleasant reading.

Debenhams’ future is hanging in the balance, and with short sellers circling too, share price movements could be volatile. The department store needs to stage a Lazarus-like recovery to turn things around from here, he added.

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