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LONDON, United Kingdom — Debenhams plunged as the UK department-store chain scrapped its profit guidance after securing a temporary lifeline from lenders, saying the rescue will be more disruptive than expected.
It was the fourth profit warning since early 2018 for Debenhams, which stuck to plans to shut about 50 stores in the medium term as it talks to creditors about a more comprehensive restructuring.
Though sales stabilised slightly in recent weeks, an earlier prediction for profit in line with market expectations is no longer valid, the company said. The shares fell as much as 12 percent early Tuesday in London.
The latest warning from the middle-market department-store chain adds to the gloom on the UK’s shopping streets, as Britons buy more online while keeping a tighter hold on their wallets with Brexit looming. In addition to higher financing costs, Debenhams blamed “macroeconomic uncertainties.”
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So far, the company has avoided the fate of rival House of Fraser, which was bought last year by billionaire Mike Ashley’s Sports Direct International after beginning insolvency procedures. Debenhams in January gained time by securing £40 million ($53 million) in liquidity.
Debenhams said talks on a more sweeping financial overhaul, including “options to restructure the balance sheet,” are continuing. That could include steps like a debt-for-equity swap, a shareholder rights issue or a so-called company voluntary arrangement, through which it would seek rent reductions.
“To do this, as we have said before, we will need the support of both landlords and local authorities to address our rents, rates and lease commitments,” chief executive Sergio Bucher said in a statement.
Ashley, who also owns a stake in Debenhams, in January orchestrated a coup to remove Bucher and chairman Ian Cheshire from the board, though the CEO remained in that role.
A decline in comparable gross transaction value moderated in the most recent eight weeks, falling 4.6 percent, compared with a 5.7 percent decline in the first eighteen weeks of the financial year, the company said.
By Eric Pfanner, Ellen Milligan; editors: Eric Pfanner, John Lauerman.
