Debenhams PLC (LON:DEB) shares slumped on Wednesday as investors braced themselves for what is expected to have been a disappointing Christmas for the department store chain.
The retailer is due to report its Christmas trading update on January 10 but the market has set its expectations low as the UK high street struggles against subdued consumer spending and online competition.
“Pictures on social media of the retailer’s messy shelves and the usual widespread discounts on goods people don’t really want in the first place would suggest that Debenhams continues to be stuck in a rut,” said AJ Bell investment director Russ Mould.
He added: “Debenhams hasn’t updated on trading since 25 October and we know from many of its competitors that November was a terrible month for retailers and December is also likely to have been a struggle.”
A profit warning from online retailer ASOS PLC (LON:ASC) about a week before Christmas dashed hopes that consumer spending over the holiday season would provide a boost to end-of-year sales for retailers. ASOS said it had seen a significant deterioration in trading in November, a key month for the group as it includes Black Friday sales.
READ: ASOS shares slump on profit warning as it succumbs to challenging retail market
Mould noted that Debenhams is now worth just £57mln, which he said is “astonishing” for a business that generated more than £2bn of sales in its past financial year.
“The UK winner of the £115 million EuroMillions jackpot on New Year’s Day could buy Debenhams and still have half their money left over,” he said.
“However, it seems fair to suggest that wouldn’t be the best way to spend their winnings given the company is drowning in debt and has a business model which is increasingly irrelevant in the modern world of retailing.”
Debenhams said in October that it would close up to 50 of its underperforming stores after posting a record full-year loss of nearly £500mln.
In December, it emerged that the company turned down an offer for a £40mln loan from Mike Ashley’s Sports Direct International PLC (LON:SPD), which owns a near 30% stake in the department store group.
READ: Debenhams turned down £40mln loan offer from Mike Ashley’s Sports Direct - media report
In a letter addressed to Debenhams CEO Sergio Bucher, Ashley said he was frustrated Debenhams did not want his help but wasn't surprised "by the predictable negative response".
Debenhams said it had declined the offer as it “came with conditions that could affect the interests of other stakeholders.”
Shares were down 5% to 4.9p in late-afternoon trading, although that had fallen more than 10% at one point earlier on.
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