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Deutsche Bank ups Debenhams to 'hold' from 'sell' after shares' slide as yield provides buffer

The bank also trimmed its target price for the FTSE 250-listed group to 50p from 52p, with the shares currently trading at 52.1p, down another 0.8% or 0.4p after a 5% drop yesterday
Debenhams store
Deusche's analysts said: “Yielding over 6%, a peak level, we think this limits the downside“

Deutsche Bank has upgraded its stance on under-pressure department stores group Debenhams PLC (LON:DEB)  to ‘hold’ from ‘sell’ after tweaking its target price following yesterday’s share price slide after the retailer’s results and strategic review outcome.

The German bank trimmed its target price for the FTSE 250-listed group to 50p from 52p, with the shares currently trading at 52.1p, down another 0.8% or 0.4p after a 5% drop yesterday.

The share price fall came after Debenhams revealed that it is considering the closure of up to 10 of its 176 stores and plans to enhance its digital offering as it reported a 6.4% fall in first-half profits to £87.8mln.

READ: Debenhams considering store closures

WATCH: Debenhams "running up a down escalator", says analyst Nick Bubb

In a note to clients today, Deutsche’s analysts said: “Debenhams faces many challenges: a long-lease property portfolio, a weak apparel market with online channel shift, a recovering competitor, adverse margin pressures and limited scope to save costs.

“It is operationally and financially leveraged in an uncertain consumer environment.”

They pointed out that new chief executive, Sergio Bucher’s strategy update “did not answer many questions, but kick-started a range of trials which may bear fruit in the future.”

The analysts said that the most important thing for them was the protection of Debenham’s dividend, even though its capex guidance was raised.

They added; “Yielding over 6%, a peak level, we think this limits the downside“.

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Debenhams Timeline

October 26 2017

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