Debenhams pushes on with rationalisation plan following pre-pack administration
Debenhams has been sold to a new company controlled by its lenders in a pre-pack administration process. It will now push ahead with plans to close up to 50 stores and develop a lower cost approach for another 20 stores.
The company’s directors rejected an investment from Sports Direct which owned some 30 per cent of the business, choosing instead the pre-pack administration which will give it access to some £200m of additional funding.
In a statement, Debenhams said: “The Group has undertaken a thorough review of its store estate in the context of the current and future retail environment and plans to proceed with a restructuring of the estate that, if approved, will result in a significant overall reduction in the Group’s rent burden and underpin a sustainable future for the Group. This is a critical component of the Group’s restructuring plan, and executing this is in part linked to the provision of the £200m facilities and lenders implementing a £100m debt for equity swap.”
In its results for the year to 1st September 2018, Debenhams said “Market conditions remain volatile and challenging. We are therefore taking a prudent approach and assume no improvement in the trading environment for the foreseeable future. We have identified a further £30m of cost savings for FY2019, annualising to c.£50m by FY2020.
- “Key elements of these savings include: further review of support centre overhead; further warehouse consolidation and automation; a further review of central costs following the implementation of the new operating model; and an end-to-end structural review of the business, including the efficiency of the supply chain.”