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.
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Previous Commentaries On Debenhams plc
Date Share Price Author Commentary
Sat 29 Dec 20184.8pIan Smith

HMV, Debenhams And Mike Ashley/House Of Fraser

With the news that HMV are in administration again it would be easy to say that this is the end for them, but to my mind both Mike Ashley and Debenhams should be queuing up to buy them, both Debenhams and House Of Fraser have a lot of space not yielding the required profit margins so dropping HMV in as either HMV or an in house brand seems to make a lot of sense.

I don’t understand how Mike Ashley with his 30% stake in Debenhams has failed to take control and with there being such a difference between the current share price of about 5p and the year high price of 35p he is unlikely to want to purchase any more shares and be forced into offering to buy the rest at 35p.

Give it another 6-12 months and this obligation could become much less onerous but would it be too late?

So who gets HMV would suggest to me the fate of Debenhams and if you have the nerve then Debenhams could be a great buy.

If Mike Ashley gets it and integrates it into Debenhams then it seems likely that he is aiming for control of Debenhams.

If Mike Ashley gets it and integrates it into House of Fraser then it would suggest a lack of interest in Debenhams and their future is in the hands of the current management.

If Debenhams gets it then it would be a real boost for the current management’s credibility and the stores future prospects

If neither gets it then I would be really surprised because there is still a massive market for CDs and DVDs which may be shrinking too much for a specialist store but not for a section in a more general store.
Tue 02 Oct 20189.38pIan Smith

Debenhams – Is it as dead as the share price suggests?

Sent back to the market in 2006 at 195p Debenhams has had a slow and steady share price decline and is now at 10p, so is this the buy of the century or a duplicate of the decline HMV?

Gradually the old high street names are dying off and I sometimes wonder if it is worth going into town as there seems to be so few shops left.

However Sports Direct is doing well with both shops and on-line ordering and they own just under 30%, as I read it this stake will not be increased in the short term as this would require them to offer to buy all shares at around 48p.

By June 2019 this will have dropped to about 20p and by the end of 2019 possibly 10p or even less.

Currently Debenhams market cap is around £110m, which is not much more than the £90m paid for House Of Fraser so waiting for Debenhams to possibly go into administration by the end of next year may not yield much of saving for Sports Direct or another buyer.

It is easy to believe that the company is dead but in the June 2018 trading update Debenhams were still predicting a pre-tax profit of around £35m-£40m with £320m in debt and an intention to reduce debt and cut capital expenditure.

Cutting cap ex seems disasterous, but with a continuing trend for large stores to close, there does seem to be an opportunity to get concessions from landlords such as rent free periods where the rent is used to re-invigorate stores offsetting the reduced cap ex.

The current management seem to see a future using more space for non retail, gyms, offices for small businesses, etc along with a more upmarket retail layout.

Or do the current management have no idea and are trying a bit of everything to see what if anything sticks in their unwanted retail space?

If the management is genuinely open to ideas I could see a very successful area within the stores where genuine local suppliers opperate, an upmarket farmers and craft product market with some sort of shared staffing.