Shares in Debenhams Slump as Radical Restructuring Considered

LONDON, United Kingdom — Shares in struggling British retailer Debenhams hit a record low on Monday after it widened the remit of adviser KPMG to include examining future options for the group, including a possible Company Voluntary Arrangement (CVA).

CVAs allow retailers to avoid insolvency or administration by offloading unwanted stores and securing reduced rents on others.

They have been adopted by a string of British store groups including fashion chain New Look, floor coverings retailer Carpetright, mother-and-baby goods company Mothercare and most recently home improvements retailer Homebase.

A spokeswoman for Debenhams said that KPMG had been an adviser to the retailer for three years but had recently had its remit expanded to include the examination of more radical restructuring options.

Debenhams has issued three profit warnings this year and its shares have fallen 69 percent. They fell as much as 19.5 percent on Monday, hitting a low of 10.3 pence.

The company said in June that it might sell non-core assets, including its Danish business, to bolster its finances and in July it denied it was facing a cash crisis over supplier insurance.

"Like all companies, Debenhams frequently works with different advisers on various projects in the normal course of business," the Debenhams spokeswoman said.

The group is in the second year of a turnaround plan under chief executive Sergio Bucher, a former Amazon executive, focused on closing up to 10 stores, downsizing 30 others and renegotiating leases and rents on 25 stores up for renewal over the next five years. It is also trying to cut promotions and improve its online service.

However, progress has been hampered by changing shopping habits, a squeeze on UK consumers' budgets, a shift in spending away from fashion towards holidays and entertainment, as well as intense online competition.

Those trends have particularly damaged the department store sector.

BHS went bust in 2016, House of Fraser was bought out of administration last month by Mike Ashley's Sports Direct and even market leader John Lewis has warned about its profit outlook.

Shares in Debenhams were down 2.1 pence at 10.8 pence at 10:19am, valuing the business at only 132 million pounds.

By James Davey; editor: Gareth Jones