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Debenhams says profit guidance ‘no longer valid’ as refinancing talks drag on

The struggling British department store saw its share price take a tumble on Tuesday after it issued the profit warning, blaming the poor economic outlook and high financing costs for its lacklustre performance.

Debenhams warned investors on Tuesday that profit guidance the company provided in January is ‘no longer valid’, with the British department store blaming macroeconomic uncertainties and increased financing costs for its failure to meet market expectations.

Despite the profit warning, the company’s CEO Sergio Bucher said that the business is making good progress with stakeholder discussions that will allow it to find a ‘firm footing for the future’.

But he did admit that this restructuring process will still require the shutdown of around 50 stores across the UK in the medium-term.

Debenhams restructuring drags on

In February, the department store managed to secure a £40 million emergency financing package that gave it more time to restructure the ailing business and helped it avoid collapse.

‘Our priority is to secure the best outcome for the business and all our stakeholders, whilst minimising the number of store closures and job losses,’ Bucher said.

‘To do this, as we have said before, we will need the support of both landlords and local authorities to address our rents, rates and lease commitments.’

The company believes that by following this cost-cutting programme it can make an annualised saving of around £80 million. Debenhams is also expecting its first ranges resulting from its sourcing partnership with Li & Fung to hit stores this quarter.

Debenhams share price takes a tumble after profit warning

Following the trading update, Debenhams share price tumbled 12% on Tuesday morning, with the slowly clawing back its losses to trade 2% down as of 4:00pm GMT.

In the six months to March 2 the department store saw its gross transaction value had fallen by 5.4% compared with the same period a year prior, with UK sales declining 6% over that time.

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