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Debenhams calls in KPMG to assess its options

Lauretta Roberts
08 September 2018

Department store Debenhams has called in advisers KPMG to advise on its future options as its finances come under increasing pressure.

The business has seen its shares slump from around 50p per share a year ago to just over 12p per share following a string of profit warnings this year. In June it said it expected pre-tax profit for FY2018 to be in the range of £35m-£40m, compared to £59m last year.

According to The Telegraph, KPMG "company doctors" are installed at the department store to come up with a financial plan, which may include floating the idea of a CVA, however the company would potentially need to run several such arrangements in tandem, since leases for its properties are held by several different companies.

Debenhams operates 170 stores, a number which some analysts believe needs to be dramatically cut back. The business has been attempting to revive its fortunes with a turnaround plan, entitled Debenhams Redesigned, which places experience and digital at the heart of its offer.

It has been revamping key locations and has begun the roll-out of new services to stores such as blow dry and beauty bar, Blow Ltd, and gyms, in partnership with Sweat! It is also rolling out the Doddle Click & Collect service across its estate meaning shoppers can collect online orders from a number of retailers from ASOS to Amazon within its stores. The increased footfall from customers collecting online orders has been proven to increase store sales.

Last week it unveiled a revamped brand and marketing campaign for autumn to help communicate the message that "Debenhams is changing" and to encourage customers to "Do a bit of Debenhams".

Debenhams

"Debenhams is changing"

The mid-market department store space has been having a torrid time of late. House of Fraser collapsed into administration in August to be bought straight back out again by retail tycoon and Sports Direct owner Mike Ashley, who is attempting to get the company fully operational again after a dispute over payment with logistics operator XPO Logistics led to its website being taken offline.

John Lewis, which unveiled its new brand a day after Debenhams, has revealed that it is planning for zero profit this year, though it is continuing to invest heavily in its stores and in its own-brand proposition to give it a point of difference in a tough and crowded market.

Fenwick too has been struggling and has announced it is shedding more than 400 jobs as it centralises its back-office functions and prepares for the arrival of a new e-commerce offer next year.

It is not inconceivable that Debenhams too might end up the hands of Mike Ashley, who already owns a near 30% stake. Should his stake exceed 30% he will be obliged, by stock market rules, to make a formal take-over offer. However his current challenge with returning House of Fraser to profit may diminish his appetite to take on another troubled department store, and wouldn't sit with his plans to create a "Harrods of the High Street".

Debenhams told The Telegraph that it "frequently works with advisers" as a matter of course.

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