Debenhams store closures put 1,200 jobs under threat
Debenhams is to close as a many as 22 stores, putting 1,200 jobs at risk across the department store chain.
The group has announced a Company Voluntary Arrangement (CVA), which will see the affected shops continue trading until early 2020.
Further closures could still be announced following discussions with landlords. Meanwhile rent reductions will be sought on many of the remaining branches.
Terry Duddy, executive chairman of Debenhams, said: “The issues facing the UK high street are very well known.
“Debenhams has a clear strategy and a bright future, but in order for the business to prosper, we need to restructure the group’s store portfolio and its balance sheet, which are not appropriate for today’s much-changed retail environment.
“Our priority is to save as many stores and as many jobs as we can, while making the business fit for the future.”
The retailer announced that it would pursue a restructuring last year, but the path for the process has now been cleared after control of the company was passed to its lenders.
Debenhams went into a pre-pack administration earlier this month, wiping out the stakes of all shareholders including Sports Direct’s Mike Ashley.
Creditors including landlords will have the opportunity to vote on the CVA in a process overseen by advisers at KPMG.
Jim Tucker, a senior restructuring partner at KPMG, said: “Today’s announcement marks the next phase of Debenhams’ financial and operational restructuring strategy, following the comprehensive funding package announced at the end of March.
“If approved, and with the support of lenders and landlords, the CVAs will allow the business the flexibility to implement its turnaround strategy with a store estate that reflects the current UK retail environment.”
Debenhams also released a financial update for the 26 weeks to 2 March, showing that sales at its UK stores declined by 7.4% during the period due to weaker footfall. Underlying earnings declined by 36.6% to £65.9m.
The stores expected to close in 2020 are: Altrincham, Ashford, Birmingham Fort, Canterbury, Chatham, Eastbourne, Folkestone, Great Yarmouth, Guildford, Kirkcaldy, Orpington, Slough, Southport, Southsea, Staines, Stockton, Walton, Wandsworth, Welwyn Garden City, Wimbledon, Witney, Wolverhampton.
Gary Carter, GMB national officer, said: “Although many will not be surprised by the closure announcements, this is devastating news for Debenhams employees who have battled hard to keep the company afloat.
“They will join the tens of thousands of retail workers made redundant in recent months.
He added: “It’s about time this Government stopped bickering over Brexit and did something to stem retail job losses and reinvigorate Britain’s high streets.”
Ed Cooke, CEO at Revo, which represents all stakeholders in the £360bn retail property sector, including landlords, retailers and local authorities, said: “By Debenhams' own admission property owners and local authorities will bear almost all the pain from this restructuring, underlining that the spirit of fairness in the CVA legislation has been compromised and needs urgent review.
“Many retail businesses are blaming all their woes on rent but in fact high levels of debt, a lack of investment and a failure to adapt quick enough to changing consumer preferences are often far bigger issues. CVAs are the sticking plaster not the cure, and have a poor success rate in returning businesses to profitability.”
Additional reporting: Tom Bottomley