Debenhams to slash store numbers in survival fight

Department chain claims it still has ‘bright future’, but Sports Direct tycoon Ashley could derail its plan

DEBENHAMS yesterday unveiled plans to shut 22 shops next year as speculation grew that Sports Direct’s Mike Ashley was waiting in the wings to swoop on the struggling department store’s prime sites.

The retailer said that around 1,200 jobs will be affected when stores shut after peak-trading at Christmas. Debenhams is also demanding that on the stores earmarked for closure rent bills are slashed in half and it is also asking landlords for reductions between 25pc and 50pc on a further 61 shops. Only 39 of Debenhams’ 166 UK stores are not affected by its restructuring plan.

The 22 stores slated for closure in 2020 are: Altrincham, Ashford, Birmingham Fort, Canterbury, Chatham, Eastbourne, Folkestone, Great Yarmouth, Guildford, Kirkcaldy, Orpington, Slough, Southport, Southsea, Staines, Stockton, Walton, Wandsworth, Welwyn Garden City, Wimbledon, Witney, Wolverhampton.

The Wolverhampton store only opened in October 2017 as part of its “Debenhams Redesigned” strategy to offer more shop services.

The company voluntary arrangement (CVA) is being pushed ahead by Debenhams’ new owners, led by hedge funds Silver Point Capital and Goldentree, which seized control of the retailer earlier this month in a pre-pack administration that wiped out all shareholders, including Mr Ashley.

Terry Duddy, Debenhams’ executive chairman, insisted the company had a “bright future” but had to restructure its store portfolio and balance sheet, neither of which were appropriate for the current retail environment. “Our priority is to save as many stores and as many jobs as we can, while making the business fit for the future,” he said.

Jim Tucker of KPMG said that if 75pc of creditors approved the CVA, it would “allow the business the flexibility to implement its turnaround strategy with a store estate that reflects the current UK retail environment”.

It is making a £25m fund available for creditors as part of its efforts to win backing for the restructuring.

Insolvency sources said that Sports Direct could derail the CVA process by approaching Debenhams’ landlords and offering a higher amount in order to gain control of desired stores. In this way Mr Ashley would successfully be able to cherry pick the stores that he wanted, paving the way to a combination with House of Fraser which he bought last year out of administration.

The Daily Telegraph understands that Sports Direct had been invited to make a bid for the business two weeks ago by the hedge funds and asked to sign a non-disclosure agreement that forbade Ashley from talking to Debenhams’ landlords.

Mr Ashley refused to sign the NDA and has instead written to the Financial Conduct Authority claiming that the restrictions meant that Debenhams’ advisers were not running a “genuine marketing or sales process”. Mr Ashley has repeated his call for regulators to investigate and halt the administration.

Sources said that Mr Ashley’s refusal to sign the NDA made it more likely that he was interested in buying some of the stores out of administration. One source said “There’s still some more action to play out.” Sports Direct declined to comment.

Debenhams also issued a trading update revealing that its UK store sales fell 7.4pc over the six months to March 3, while like-for-like sales, which include online transactions, fell by 5.4pc.

Separately, Cotswold Outdoor also launched a CVA yesterday, advised by Grant Thornton, to cut its rent bill.