Debenhams will reveal the biggest ever loss in its 240-year history and confirm that it intends to close around a third of its 165 stores over the next five years when it announces its year-end numbers tomorrow.
According to Sky News, the department store chain is set to announce an almost £500m loss as a result of non-cash write-downs. The write-downs will wipe out its underlying profits of £33m.
One of the write-downs, amounting to £300m dates back to the 2003 buyout of the retailer by a consortium of private equity investors, Sky News said.
It is understood that the chain’s new finance director Rachel Osborne had been keen to clear the books by taking a hit on the write-downs and making a clean break from the past.
While the non-cash write-downs do not affect the chain’s underlying financial performance it is expected to announce a significant reduction in its store estate with around 50 closures, which would result in the loss of 5,000 jobs over five years.
Any store closures would need to be arranged with the consent of its landlords, which may not be easy to achieve in the current climate when the property industry has been hit by a string of CVAs in the retail and casual dining markets.
Rumours began circulating earlier this autumn that Sports Direct’s Mike Ashley, having acquired House of Fraser from administration in the summer, would make a play for Debenhams too. Sports Direct already owns an almost 30% stake in Debenhams.
However Sports Direct issued a statement in September saying it had no plans to make a bid in the short-term, but it reserved the right to change its mind should there be a material change in circumstances at Debenhams, or if it has the full backing of the Debenhams board, or in the event of a rival bid.