By James Davey
LONDON (Reuters) – British department store retailer Debenhams said on Tuesday that while major store closures were an option, the company was not actively pursuing this route.
Shares in Debenhams slumped on Monday after news that the remit of adviser KPMG had been widened to include consideration of a Company Voluntary Arrangement (CVA), which allows retailers to avoid insolvency or administration by offloading unwanted stores and securing reduced rents on others.
“The implication of the (weekend) papers was we were actively driving a CVA with KPMG and it’s simply not true,” Debenhams’ chairman Ian Cheshire told BBC radio, adding that all options remained open for the future.
CVAs have been used by British groups including fashion chain New Look, floor coverings retailer Carpetright, mother-and-baby goods company Mothercare and most recently home improvements chain Homebase.
Debenhams, which has issued three profit warnings this year and whose shares have lost two thirds of their value, sought to reassure investors by rushing out a trading statement on Monday saying it would meet analysts’ profit forecasts for 2017-18.
“Anyone who’s actually studied the subject would know we’re not insolvent,” Cheshire said, adding that KPMG has been working with Debenhams for three years.
“We saw this sort of circus develop over the weekend. It’s like having a bunch of nosey neighbours watching your house.”
“Somebody sees somebody in a suit going into a room, the second person concludes it’s a doctor, the third person concludes it’s an undertaker and by the time you get to the end of the day you’ve got cause of death and everyone’s looking forward to the funeral,” Cheshire, a former CEO of home improvement retailer Kingfisher, said.
The fall in Debenhams’ share price reflected a combination of structural shifts in retail and an “extraordinary year of upheaval” in the department store sector which has seen rival House of Fraser go bust and market leader John Lewis [JLPLC.UL]issue a huge profit warning, he added.
Cheshire said there was a future for an updated Debenhams format in Britain, noting that the department store remains the biggest seller of make-up in the country.
“We’ve got lots of things we can do. The challenge for us is we’ve identified a new format – now how do we move from the legacy of many years of very long leases?,” he said.
“There is room for … what I would call the Selfridges of the high street, which brings newness and fashion and beauty,” Cheshire said referring to the upmarket department store rival.
Debenhams’ shares were up 0.3 pence at 11.9 pence at 0839 GMT, valuing the business at 144 million pounds.
(Reporting by James Davey; Editing by Alexander Smith)