British department store Debenhams has cancelled its dividend, announced a full-year loss of almost half a billion pounds and said it will close up to 50 of its stores putting around 4,000 jobs at risk, in the latest sign of a downturn on UK high streets.
The struggling group, whose shares have lost three quarters of their value this year because of successive profit warnings, announced a pre-tax loss of £492m for the year to September, a period where its same-store sales also fell by 2.3 per cent.
The majority of the loss came after the group, which hired a new finance director in August, decided to write down the value of its assets by £525m. This included a £302m goodwill impairment, a £118m writedown of store values, and an £80m write-off for IT systems, in what were mostly non-cash charges. Without these costs, Debenhams would have made a full-year pre-tax profit of £33m, down from £95m a year earlier.
Debenhams’ latest poor performance comes amid weak wage growth and economic uncertainty in the UK, while more people also choose to shop online with the likes of Amazon instead of visiting department stores to buy furnishings, clothes or gifts.
Debenhams’ rival, House of Fraser, went into administration in August and was swiftly snapped up by billionaire Mike Ashley’s Sports Direct for £90m. Profits at John Lewis, which has long been the stalwart of the department store sector and whose performance is viewed as a barometer of middle class Britons’ willingness to spend, collapsed by 99 per cent in the first half of its financial year.
“It has been a tough year for retail in 2018,” Debenhams chief executive Sergio Bucher said. “And our performance reflects that.” He added that, alongside recently-hired finance director Rachel Osborne, “we are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.”
Mr Bucher originally planned to close ten outlets but will now shut 50 shops over the next three to five years. The group said on Thursday that it was also had “further additional space and rent reduction plans,” and will reduce its capital expenditure to £70m a year, which is half what it spent this year.
The dividend has been cancelled “in line with [our] stated plan to prioritise debt reduction and cash generation,” the group said.
The Debenhams boss has also been working on new store concepts designed to tempt shoppers back to the business. The group now has nine sites that feature refreshed designs and enhanced levels of service. Its recently opened site in Watford, for example, offers a free personal shopping. Future investment will be focused on the “priority elements” of its strategy to redesign and refresh its shops, Debenhams said.