Debenhams plc (lon:deb)
Debenhams – A Real World Reminder

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Title: Debenhams – A Real World Reminder
Company: DEB - Debenhams plc
Share Price Then: 1.83p
Author: Ian Smith
Date: Wed 10 Apr 2019
Comments: I had Debenhams shares a while back, buying at 28p and selling at 23p so I was not caught up in the recent administration but did lose money.

One of my main reasons for buying was the level of Mike Ashley’s involvement, I made a similar mistake a while back buy only on an experimental level with FastJet. In that case Stelios of EasyJet was involved.

Given Ashley’s high profile, the success of Sports Direct and the amount invested I expected to see a big change in Debenhams shops/online presence. I sold when it became clear to me that despite the amount invested the Debenhams board was hostile to SD and SD didn’t have enough shares/interest to force the issue.

When Debenhams came of private ownership it was a highly recommended share as part of a balanced portfolio with some retail businesses. Now you can find people saying that it was always a risky share as it was overvalued when it was sold.

This failure is quite a big issue as the amount owed by Debenhams is around £500-£700 million and this could affect even a diverse portfolio.

As well as the lost Debenhams shares, it is a loss for;

Barclays and Bank of Ireland, major lenders, okay this won’t bankrupt them.

Landlords such as INTU and British Land will be faced with more empty retail space or lost rent and if you don’t have one of these then you probably aren’t running a safe balanced portfolio, not that there is anything wrong with that.

Sports Direct have already written down a lot of their Debenhams investment but it is still lost money for them and you if you have SD shares.

There may also be consequences for SD, although MA is not liked in the press SD is a successful business but it has a lot of debt something like £500million. If MA and SD become a tarnished brand this debt may become more expensive and harder to extend.

It may also throw doubt over Sports Direct in the longer term, was MA just lucky with a "pile it high sports shop" if so we may see a loss in confidence with the whole SD retail project, HoF, Evans etc.

Many smaller unspecified suppliers may also be left unpaid some of which you may have shares in.

Clearly the failure of one retail chain isn’t going to be the end of the world, but you add Debenhams to House of Fraser and the knock on for other areas of a balanced portfolio become clearer.
Read Count: 73/7050

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