SHARES in department store chain Debenham’s have plunged more than 10 per cent amid speculation that it has appointed advisers to draw up “emergency turnaround plans” for the ailing retailer.

As retailers continue to battle tough trading conditions on the high street, it was reported on Sunday that the struggling chain had drafted in experts at KPMG to advise on its options.

One route reported to be under consideration was for the company to enter into a Company Voluntary Arrangement (CVA), a controversial mechanism which some high street retailers have pursued in recent months to shut under-performing stores and renegotiate terms with landlords.

House of Fraser had agreed a CVA with its landlords prior before it went into administration and was sold to Mike Ashley’s Sports Direct in a pre-pack deal last month. New Look, Carpetright and Mothercare are among other retailers which have struck CVAs in recent months, paving thee way for hundreds of store closures and thousands of redundancies. CVAs have angered some property owners because they feel the mechanism leaves landlords out of pocket.

Debenhams responded to the speculation by releasing a statement to the stock market yesterday morning, which made no direct reference to KPMG.

Chairman Sir Ian Cheshire said: “As we stated in June, the board continues to work with its advisers on longer term options, which include strengthening our balance sheet and reviewing non-core assets. This activity is in order to maximise shareholders and protect other stakeholders, including our employees.”

Debenhams yesterday declared its expectation of achieving a pre-exceptional pre-tax profit of £33 million for the full year, which it said was in line with current consensus of between £31m and £36.5m. It reiterated, further to its trading update in June, that it anticipates ending the year with net debt o around £320m, in line with guidance and with headroom on its £520m medium term facilities. The company added that it has continued to strengthen its financial position, including by increasing headroom on its fixed charge covenant, as announced on August 1. It said this would maximise its flexibility amid volatile market conditions. Debenhams also noted that the start of the autumn season had been encouraging, declaring that “any sustained upturn would result in a rebound in our profit performance”.

Chief executive Sergio Bucher said: “The market environment remains challenging and underlying trends deteriorated through the summer months.

“Nevertheless, the product and format improvements we have tested are gaining traction and we are ready to scale up some of our strategic activity ahead of peak.

“Having put in place a leaner operational structure and strong leadership team, and taken action to strengthen our financial position, we are well equipped to navigate these market conditions and take advantage of any trading opportunities that emerge.”

The speculation centring on Debenhams follows a major cost-cutting drive carried out by the retailer in response to its faltering performance, launched in January. The restructure saw the firm slash 320 store management roles in February as it targets £10 million of cost savings this year and £20m extra annually.

A further 90 roles, this time focused on its fashion and home departments, were axed in August, which came after Debenhams had issued its third profit warning this year in June.

The company has been linked with a takeover bid from shareholder Mike Ashley.

KPMG said it was making no comment at this time.

Shares closed down 1.3p at 11.5p.