British department store Debenhams revealed losses of £491.5m this morning for the year ending 1 September.
It’s the biggest ever loss in its 240-year history, signalling a closure of around a third of its 165 stores over the next three to five years and the loss of a possible 4,000 jobs.
In what is another sign of the continuing bloodbath on the high street amid a series of recent retail closes and collapses, Debenhams CEO, Sergio Bucher, said: “It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging, and we are taking tough decisions on stores where financial performance is likely to deteriorate over time. Debenhams remains a strong and trusted brand with 19m customers shopping with us over the past year.”
Underlying profit before tax also plummeted 65.1% year-on-year to £33.2 million, before cash exceptional charges relating in part to the “Debenhams Redesigned” strategy. Meanwhile Debenhams’ EBITDA fell 35.6% in the UK, while the retailer’s overall EBITDA fell 27.5% year-on-year to £157.5 million.
The reported loss comes after three profit warnings this year and £512.4 million worth of write downs relating to store and lease provisions, impairment charges and IT costs. One of the write-downs, amounting to £300m, dates back to the 2003 buyout of the retailer by a consortium of private equity investors. 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.
The annual loss compares to the £59m profit the department store recorded the previous year. Like-for-like sales fell 2.3% year-on-year, with fashion and beauty remaining weak, and discounting also a notable factor.
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.