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sancho panza

Debenhams:Death spiral?

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Decl:no position

June 25th

http://www.proactiveinvestors.co.uk/companies/news/199482/rbc-cuts-target-for-debenhams-following-third-profit-warning-199482.html

'Canadian bank RBC has cut its target price for department store chain Debenhams PLC (LON:DEB) to 19p from 25p following the company’s third profit warning in six months.

Analysts slashed their pre-tax profit (PBT) forecasts for the firm by 25%-30%, saying they didn’t expect much improvement in sales for the remainder of the current financial year.

 

Debenhams was facing easier comparisons as from May but we think it has continued to suffer from having a sub-optimal clothing and home offer and from being overly reliant on promotional activity to drive footfall and online spend” the bank said.

They added: “Debenhams has stated that it would only breach its fixed charge covenant if PBT falls below £20mn, but on c.£3bn of Gross Transaction Value (GTV) we estimate “this means Debs is only one poor Christmas away from a breach.”

Despite the bleak outlook, the bank also highlighted several options for the company to strengthen its balance sheet, including its plan to cut capital expenditure for the 2019 financial year to £75mln-£90mln from £140mln in 2018 in addition to a strategic review of its non-core assets, a small printing business in south-west England and Danish department store chain Magasin.

RBC said Magasin was Debenhams' most profitable business and has a growing multi-channel capability which could be of interest to buyers in a potential sale that could be a “potential positive catalyst for the shares”.

Debenhams issued its third profit warning on 19 June, pointing to “exceptionally difficult times in UK retail”.

The retailer, which first warned on profits in January and again in April, said trading in May and early June fell short of expectations due to increased competitor discounting and weakness in key markets.

In mid-morning trading Monday, Debenhams shares were down 1% at 17p.'

https://www.investing.com/equities/debenhams-balance-sheet

Worht noting Assets/Liabilities:£2.2bn vs £1.32bn but that assets includes £990mn of 'intangibles' and £640 mn of property and plant ie stores I presume.

 

 

image.png.47a2b0890282c0adb3a81701ec6ccfe1.png

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Posted (edited)

When I was in Copenhagen last year - Magasin was a nice store (I visited 2 there), full of nice products and clothes with staff interested in helping you. @SNACR would either love it or hate it...

In fact it's absolutely everything Debenham's isn't

Edited by eek

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Debenhams seems to have been in a death spiral for years. I've two stores relatively close to me, Guildford and Crawley. Guildford, clearly they have invested money, Crawley looks like a TK Max - maybe they will get rid of some of the stores rather than go completely bust - I prefer Debenhams to M & S so would be miffed if they completely disappeared.

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10 hours ago, Dipsy said:

Debenhams seems to have been in a death spiral for years. I've two stores relatively close to me, Guildford and Crawley. Guildford, clearly they have invested money, Crawley looks like a TK Max - maybe they will get rid of some of the stores rather than go completely bust - I prefer Debenhams to M & S so would be miffed if they completely disappeared.

Well, since it was refloated by the PE company, all the assets stripped out and replaced with debt

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I worked as a Trainee Manager at Debenhams.

It seems to have always been one bad year away from going under. I remember the Burton Group splitting their portfolio back in the day.

Debenhams stores were very bright and pleasant compared with the austere dimly-lit House of Fraser which was the main competition.

But that dynamic fell away when people no longer targeted department stores as a destination and the high street began to specialise.

The rise of big shopping malls brought the presence of top brand stores alongside it.

In more remote backwaters Debenhams still had a place. It was the only store to get many things but that can't sustain it.

Now add online ordering and it becomes very vulnerable.

It does some things well. Customer service and range especially of clothing and some homeware but being everything to everybody - not quite high end nor anything specific is not a good place to be in the modern age.

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Closing 50 stores

I was in my local one last weekend looking for a pair of jeans in the menswear dept. I take it that a 34 inch waist is quite popular as all I could find is one in the style I liked that was too long in the leg (I need a regular leg size)

I went to their 'Red Herring' section. Bough a fair quantity of the clothes in the past 20 years. Looked under the sign for 'Boot cut' jeans but there were only slim or skinny fit jeans so that doesn't tie in well. They were stacked inside a box like shelf on the wall so sorting through 'em was a pain.

Left empty handed.

Before Debenhams I went to Peacocks but their jeans tended to be for millenials or Gen Z with matchstick legs. I never knew that 'ultra skinny' jeans were a thing now. O.o

Looks like online retailers it is, then. 9_9

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BBC News At One 25/10/2018

Maureen Hinton, Retail Expert, Global Data.

" The landlords are negotiating with all retailers at the moment, it appears. 

...and so they are not going to let them go away. They'll have costly leases to get out of, and on top of that, they'll have less money to invest in their stores in the future.

... and that's one of the key things they need to do to survive. "

Wakey, wakey, it's over.

Debenhams won't survive.

Landlords will have empty properties.

Nobody will rent them.

Everything will be devalued, Councils will lose income, a drop in shoppers will have a knock on effect, other shops will shut, everything will be devalued, Councils will lose income, a drop in shoppers will have a knock on effect, other shops will shut. Everything will be devalued....

The High Street is finished.

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Well they can just divide up the old buildings and turn them into flats. The landlord has no other choice if Debenhams closes one of it's stores in their building. I can't see any other retailer going in there. When Woolworths went, Poundland and 99p Stores stepped into many of the vacant spaces. With Dedenhams it's not so clear.

Takers:

Lidls/Aldi - no

Poundland - no

John Lewis - maybe, unlikely.

B&M Bargains - no they like out of town outlets

Wilko - no

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17 hours ago, 201p said:

Well they can just divide up the old buildings and turn them into flats. The landlord has no other choice if Debenhams closes one of it's stores in their building. 

My local Debenhams in Norwich would turn into flats fairly easily. The upper floors have smaller windows. What to do with the ground floor retail space is less obvious. :/ Maybe have that as car parking and the basement as storage sheds. 

A lot of former offices have been turned into bijou living cells so why not shops and stores? 

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On 25/10/2018 at 21:29, 201p said:

Well they can just divide up the old buildings and turn them into flats. The landlord has no other choice if Debenhams closes one of it's stores in their building. I can't see any other retailer going in there. When Woolworths went, Poundland and 99p Stores stepped into many of the vacant spaces. With Dedenhams it's not so clear.

Takers:

Lidls/Aldi - no

Poundland - no

John Lewis - maybe, unlikely.

B&M Bargains - no they like out of town outlets

Wilko - no

The only taker would be John Lewis.The Debs footprint is massive.As was HoF......

Given JL's recent trading update,I don't think they'll be expanding square footage.

Their size might appeal to M&S but they're shutting rather than expanding.

Like you,I can't think of anyone that will fill that footprint.

 

6 hours ago, UmBongo said:

My local Debenhams in Norwich would turn into flats fairly easily. The upper floors have smaller windows. What to do with the ground floor retail space is less obvious. :/ Maybe have that as car parking and the basement as storage sheds. 

A lot of former offices have been turned into bijou living cells so why not shops and stores? 

The LL's could always farm Housing benefit recipients until the fiscal deficit comes home to roost.

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On 26/10/2018 at 13:54, UmBongo said:

A lot of former offices have been turned into bijou living cells 

They've had a real go at doing that with the Bracknell office space glut. I think I can fairly safely say it hasn't worked though. I lived in one for a while but lucky I moved out as it is now boarded up a hell of an eyesore. I used to walk to the pub and go past planning application notices for residential conversion posted outside a few more offices, but a couple of years later they still seem to be empty and unconverted. I don't know the economics of doing the conversion but it is obviously not so easy. Could be because Bracknell already has quite a few proper apartment blocks which look empty.

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4 hours ago, Funn3r said:

They've had a real go at doing that with the Bracknell office space glut. I think I can fairly safely say it hasn't worked though. I lived in one for a while but lucky I moved out as it is now boarded up a hell of an eyesore. I used to walk to the pub and go past planning application notices for residential conversion posted outside a few more offices, but a couple of years later they still seem to be empty and unconverted. I don't know the economics of doing the conversion but it is obviously not so easy. Could be because Bracknell already has quite a few proper apartment blocks which look empty.

I habe an ongoing argument on ToS about the mass dissappearance of jobs fron the m4 corrridor.

In my time in mucknell 20 years ago, the battle of employment v benefits suckers was already being won by single mums.

I heard theyd knocked down converted the 3m buildingwhich is far as mucknell gets to architecture notable features.

Ive managed to avoid going into bracknell for 15 years, when tge last person i knew jacked it in to move to the west country - she was knocked up anf no way on earth was she bringing her kid up there. She was from ascot.

 

The answer on tge stalled resi conversions is LHA.

Tower blicks re expensive to convert.

Only worth doing if rih owners are buying i.e london.

Makes no sense in mucknell or bstoke - just bennie housing.

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