Debenhams reports record annual loss of 633.7 million USD, 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 3,745 million dollars and group revenue decreased by 2.5 percent to 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 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 56 million dollars, a decline of 59.6 percent and profit before tax before exceptional items decreased by 65.1 percent to 42.8 million dollars. Profit after tax but before exceptional items decreased by 64.2 percent to 36 million dollars and profit after tax after accounting for exceptional items was a loss of 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 2,953.3 million dollars and reported revenue decreased by 3.2 percent to 2,366.4 million dollars.

In the UK, the company added, EBITDA before exceptional charges decreased by 35.6 percent to 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 10.9 million dollars.

In the International segment, gross transaction value of 791.4 million dollars was 1.5 percent higher than last year and reported revenue increased by 0.5 percent to 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 58.4 million dollars, with operating profit increasing by 4.2 percent to 45 million dollars as a result of the sales growth.

Picture credit:Debenhams press area