Debenhams, an iconic department store chain in the UK, has recently made headlines with the announcement of a Company Voluntary Arrangement (CVA) as part of its strategic efforts to stabilize its financial position and ensure a sustainable future. The decision to close up to 22 stores in 2020 comes in response to a challenging retail environment and a decline in sales experienced by the company.
The implementation of two CVAs by Debenhams will impact its key trading entity, Debenhams Retail Limited, as well as Debenhams Properties Limited. Despite the store closures, all existing Debenhams locations are expected to continue operating in 2019, including the crucial Christmas season. However, stores such as Altrincham, Ashford, Birmingham Fort, and Canterbury are among those slated for closure.
In order to support the affected employees, Debenhams has committed to redeploying as many of the 1,200 staff members as possible. The final number of store closures will be influenced by various factors such as future performance, lease negotiations with landlords, and discussions with local authorities regarding business rates.
Terry Duddy, the Executive Chairman of Debenhams, underlined the necessity of restructuring the store portfolio and balance sheet to adapt to the changing retail landscape. Despite the challenges faced on the UK high street, Debenhams remains optimistic about its prospects in segments like cosmetics, skincare, and fashion. The restructuring plan aligns with the company’s Redesigned strategy, which aims to streamline its UK presence with better-quality stores.
Debenhams has assured that the CVA process will not impact trade suppliers or employees, who will be paid in full. The company will seek creditor approval for the CVA, with a meeting scheduled for May 9. To gain support from landlords, Debenhams has set aside a fund of up to £25 million for creditors impacted by the CVA to participate in the future growth of the UK business.
Additionally, alongside the CVA news, Debenhams issued a trading update for the 26-week period ending on March 2. The company reported a decrease in group gross transaction value and like-for-like sales, with UK sales dropping by 5.4%. Despite the challenging retail environment, digital sales saw a slight increase of 2.5% on a like-for-like basis.
As Debenhams navigates through this restructuring phase, the company remains committed to preserving as many stores and jobs as possible while positioning the business for long-term success in the ever-changing retail landscape.
For more information on Debenhams’ restructuring plans and the CVA process, please visit their official website here. To stay updated on the latest developments and news related to the retail industry in the UK, check out Retail Gazette here.
