Debenhams launches CVA as torrid trading continues

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Debenhams has launched its CVA proposal and revealed trading has continued to suffer, with like for likes spiralling in the six months to March.

The struggling department store chain, which was put into a pre-pack administration earlier this month after protracted wrangling around its restructuring and emergency funding, plans to close 22 stores next year.

It then plans to close around 30 more stores over the coming years. All stores will remain open throughout 2019.

Creditors will vote on the CVA on May 9. Each proposal needs the support of 75% or more of creditors to be approved.

Around 1,200 people working in the stores may be affected but the business will try to deploy as many as possible.

The stores earmarked for closure 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 business reported an interim trading update today, which revealed like for likes crashed 5.2% in the six months to March 2. UK stores sales were down 7.4% although stores in the Debenhams Redesigned format, established by former chief executive Sergio Bucher, performed around 1.5% better.

UK gross transaction value declined 5.4% to £1.23bn while UK EBITDA dropped 48% to £37.1m. International EBITDA fell 9.7%.

The final number of closed shops will depend on future trading performance, discussions with landlords regarding changes in lease terms and rental levels, and talks with local authorities regarding business rates.

Debenhams is understood to be seeking reduced rent periods from landlords of stores outside the 50 slated for closure but will not seek rates-only deals.

The department store group, now owned by a consortium of lenders understood to comprise banks such as Barclays and Bank of Ireland, as well as hedge funds Alcentra and Silver Point, said the CVA would “serve to keep Debenhams on a stable financial footing and ensure the future of the company”.

Executive chair Terry Duddy said: “The issues facing the UK high street are very well known. Debenhams has a clear strategy and a bright future, but in order for the business to prosper, we need to restructure the group’s store portfolio and its balance sheet, which are not appropriate for today’s much-changed 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.”