Debenhams reports record annual loss of 491.5 million pounds, to close 50 stores

Debenhams plc in its preliminary results announcement for the 52 weeks to September 1, 2018, said that the group gross transaction value decreased by 1.8 percent to 2,900.4 million pounds (3,745 million dollars) and group revenue decreased by 2.5 percent to 2,277 million pounds (2,940 million dollars), while group like-for-like sales decreased by 2.3 percent on a reported basis and 2.7 percent on a constant currency basis. Reported profit before tax after exceptional items decreased from 59 million pounds profit in FY2017 to a 491.5 million pounds (635 million dollars) loss. The company added that it plans to close up to 50 stores over 3-5 years, compared with the 10 previously identified.

Commenting on the full year trading, Sergio Bucher, the company’s CEO, said in a statement: "It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging. Working with our new CFO Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline and to prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time.”

Debenhams sales and profit suffer amid challenging retail

Debenhams said that the constant currency like-for-like sales performance reflects the difficult market conditions in FY2018 with lower footfall and heavier discounting having impacted our overall sales. The shift to digital also continued, with like-for-like digital sales growth of 12.3 percent representing 18.3 percent of group gross transaction value.

Group operating profit, before exceptional costs, was 43.4 million pounds (56 million dollars), a decline of 59.6 percent and profit before tax before exceptional items decreased by 65.1 percent to 33.2 million pounds (42.8 million dollars). Profit after tax but before exceptional items decreased by 64.2 percent to 27.9 million pounds (36 million dollars) and profit after tax after accounting for exceptional items was a loss of 460.2 million pounds (594.2 million dollars). Underlying basic and diluted earnings per share, before exceptional items, decreased by 65.6 percent to 2.2 pence.

Debenhams sales continue to decline in the UK

GTV for the UK segment decreased by 2.7 percent to 2,287.3 million pounds (2,953.3 million dollars) and reported revenue decreased by 3.2 percent to 1,832.7 million pounds (2,366.4 million dollars).

In the UK, the company added, EBITDA before exceptional charges decreased by 35.6 percent to 112 million pounds (144.5 million dollars) as a result of the sales decline and additional markdown required to maintain competitive pricing and market position. Operating profit before exceptional costs for the year, after increased depreciation costs arising from increased capital investment in Debenhams Redesigned strategy, decreased by 88.5 percent to 8.5 million pounds (10.9 million dollars).

In the International segment, gross transaction value of 613.1 million pounds (791.4 million dollars) was 1.5 percent higher than last year and reported revenue increased by 0.5 percent to 444.3 million pounds (573.5 million dollars) driven by an improvement in performance from Magasin du Nord and the Republic of Ireland, both of which benefited from strong digital growth. Sales in the franchise business fell 4.6 percent as a result of the net five closures (nine closures and four store openings). EBITDA grew by 5.3 percent to 45.3 million pounds (58.4 million dollars), with operating profit increasing by 4.2 percent to 34.9 million pounds (45 million dollars) as a result of the sales growth.

Picture credit:Debenhams press area