Debenhams PLC (LON:DEB) shares sank on Tuesday after the struggling retailer issued yet another profit warning.
In a trading update, the department store said its guidance from a January 10 statement forecasting “profits in line with market expectations” for the full year was “no longer valid” amid macroeconomic uncertainties, increased financing costs, and additional working capital needs.
READ: Debenhams’ £40mln cash injection: Stay of execution or genuine lifeline?
The firm added that in the eight weeks since the January update the decline of its gross transaction value (GTV) had “moderated” with like-for-like sales down 4.6% compared to a 5.7% drop in the first 18 weeks of the fiscal year.
Debenhams also said discussions with stakeholders regarding a £40mln bridge facility to help fund itself were “continuing constructively”.
Sergio Bucher, Debenham's chief executive, reiterated the company’s expectation that it would close 50 stores in the medium-term and that the company’s priority was “to secure the best outcome for the business and all our stakeholders, whilst minimising the number of store closures and job losses”.
The warning marks the fourth profit alert from the chain in the last 15 months, having issued three in 2018 as high street retailers continue to suffer from a shift online as well as a consumer spending squeeze.
Manoeuvring at the top hasn’t helped matter as the chief executive and chairman were both ousted in a shareholder rebellion in January led by Sport Direct International PLC’s (LON:SPD), although Bucher remained in his post but not as a director.
Company has “all but lost its value”
Speaking to Proactive, a retail analyst at a mid-tier investment bank didn’t hold out much hope for the department stores group, saying the Debenhams brand had “all but lost its value”.
They weren’t optimistic about the £40mln funding package either.
“If you’re a creditor, why would you take the risk? The LFLs just keep going backwards”.
The analyst added that while Debenhams may be facing some better comparatives in the next few months against the ‘Beast from the East’ chaos last year, the 2018 summer figures, lifted by the heatwave, would prove much tougher to beat and could be another nail in the coffin.
"It looks like consumer confidence hasn’t really shown signs of rebounding so it’s not a good time to be in the situation that they’re in".
Broker slashes target by 75%
The sentiment was echoed by analysts at broker Peel Hunt, who cut their target price to 1p from 4p and reiterated a 'sell' rating on the stock, saying the real story was "when the group will launch a CVA, equity raise and restructuring plan".
The broker added that with no confirmed date for the company's interim results next month, they believed an announcement would "come sooner rather than later", speculating around the end of April.
In mid-morning trading, shares were down 6.7% at 2.98p.
-- Adds Peel Hunt comment, updates share price --