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Debenhams to report biggest loss in 240-year history as stores face axe

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Debenhams, Britain’s biggest standalone department store chain, will announce the biggest loss in its 240-year history on Thursday as it sets out a plan to shrink its footprint in a radically shifting retail environment.

Sky News can reveal that Debenhams will report a statutory annual loss of almost £500m for the year to 1 September.

The mass of red ink on its accounts will arise from an overall charge of more than £500m – offsetting underlying profits of about £33m – relating to goodwill and impairments connected to store leases and IT systems.

Alongside the full-year loss, Debenhams will confirm the closure of one-third of its 165 stores over the next five years, a stark upward revision from earlier guidance that around ten of its stores were facing the axe.

That closure programme will entail the eventual loss of thousands of jobs from its 27,000-strong UK workforce, although Debenhams is not expected to set out details of the headcount changes or affected individual stores on Thursday.

Approximately 5,000 jobs are ultimately expected to be affected by the existing restructuring plans over a five-year period.

Sources close to Debenhams emphasised that the writedowns were non-cash items and did not affect the company’s financial position.

The goodwill charge, which will be in the region of £300m, dates back to the 2003 purchase of the department store chain by a consortium of private equity firms, they added.

One insider described the results presentation as an attempt to mark a clean break with the past led by Rachel Osborne, Debenhams’ new finance director.

Its dividend will be axed, while roughly £70m earmarked for capital expenditure will be cancelled.

The figures will underline the scale of the challenge facing the business, which is led by Sir Ian Cheshire as chairman and Sergio Bucher, the former Amazon executive who took the reins as chief executive in 2016.

In addition to the 50 stores now expected to close, a further 15 were described by an insider as being “on the margins” of the core Debenhams estate.

However, the ability to shrink its store portfolio will depend on the co-operation of landlords, many of home have been scarred by a series of retail sector restructurings and collapses this year.

Carpetright, Mothercare and New Look were among the chains which turned to controversial Company Voluntary Arrangements (CVAs) – mechanisms which imposed steep financial haircuts on creditors, including the owners of their stores.

Debenhams denied in September that it was drawing up plans to launch a CVA, and people close to its board say it is hopeful that it can restructure the business through direct negotiations with landlords rather than needing to resort to a formal process.

“This is about working through a consensual effort to give this business an investable future,” said one.

Shares in Debenhams have fallen by more than 80% over the last year amid growing doubts about whether it can avoid the fate of its rival, House of Fraser (HoF), which slid into administration during the summer.

HoF was swiftly acquired by Sports Direct International, run by the billionaire tycoon Mike Ashley, whose company is also the largest shareholder in Debenhams.

Analysts predict that he will mount a bid for the listed chain, possibly through any insolvency process it could be forced to resort to.

Debenhams, which now has a market value of just over £100m, has nevertheless unveiled a new store blueprint that it believes can revive its fortunes.

An 88,000 square foot outlet in Watford, which offers a personal shopping service, is said to have drawn a positive response from customers in its first few weeks of trading.

It is also understood to be trading strongly on digital platforms.

The company is also trying to sell Magasin du Nord, its Danish department store chain, although an auction is still in its early stages.

A Debenhams spokesman declined to comment on Wednesday evening.

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