SHARES in embattled department store Debenhams fell by seven per cent in early trading yesterday as the retailer insisted it has a healthy balance sheet after claims it was facing a crisis of confidence among credit insurers.
The retailer, which has issued three profits warnings and seen shares lose more than half their value since the start of the year, denied that insurers had cut or refused cover for suppliers after reports in a Sunday newspaper. Credit insurance protects suppliers against the risk of customers going out of business before payment for goods is made.
“Debenhams has a healthy balance sheet and cash position,” said a company spokesman. “All the credit insurers continue to provide cover to our suppliers and we maintain a constructive relationship with them.
“It is well-documented that market conditions are challenging, but Debenhams continues to be profitable, has a clear strategy in place and is taking decisive actions to strengthen the business.?”
Last month, the mid-market Debenhams – which has 16 stores in Scotland – said that a programme to make cost savings of £20 million was on track, with a new, leaner operating model designed to unlock further opportunity to drive efficiencies in the future. The retailer also said it was seeing “positive early results” from a revitalised fashion offer.
Chief executive Sergio Bucher, a former Amazon executive, also said that the launch of a new multi-brand format trial “will significantly broaden our brand offer in smaller stores”.
Debenhams warned in June that it did not expect brutal trading conditions to abate any time soon. Analysts said, if anything, they have got worse, with Britain’s prolonged spell of hot weather putting people off shopping and prompting early summer sales and promotions.
Other retailers are also struggling, however, as soaring business rates and online competition increase. House of Fraser has announced plans to shut around half of its stores while Marks & Spencer will also close shops. John Lewis has also warned of a substantial drop in full-year profit.
Debenhams has forecast year-end net debt of about £320m.
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