1,200 jobs at risk as retailer unveils store closure plans

Debenhams

Debenhams is to shut 22 stores next year as part of a restructuring of the department store chain.

Around 1,200 staff work at the affected stores and they were told the news this morning.

The closures will be part of two CVAs and are expected to be the first wave that will eventually see around 50 of Debenhams’ 166 stores shut.

Last week its chief executive Sergio Bucher departed after a pre-pack administration resulted in the company’s lenders taking control.

The stores dueto close in 2020 are Altrincham, Ashford, Birmingham Fort, Canterbury, Chatham, Eastbourne, Folkestone, Great Yarmouth, Guildford, Kirkcaldy, Orpington, Slough, Southport, Southsea, Staines, Stockton, Walton, Wandsworth, Welwyn Garden City, Wimbledon, Witney, Wolverhampton.

It has also warned that its three warehouse facilities “could be consolidated further”. It had previously confirmed the closure of its Lodge Farm warehouse near Northampton.

“The issues facing the UK high street are very well known,” said Debenhams executive chairman Terry Duddy.

“Debenhams has a clear strategy and a bright future, but in order for the business to prosper, we need to restructure the group’s store portfolio and its balance sheet, which are not appropriate for today’s much changed retail environment.

“Our priority is to save as many stores and as many jobs as we can, while making the business fit for the future.”

The company plans to keep all of its stores open for the rest of the year, including through the key Christmas period.

It said that further store closures would be “dependent on future trading performance, discussions with landlords regarding changes in lease terms and rental levels, and with local authorities regarding business rates”.

Jim Tucker, a senior restructuring partner at KPMG and proposed supervisor of the CVAs, said: “Today’s announcement marks the next phase of Debenhams’ financial and operational restructuring strategy, following the comprehensive funding package announced at the end of March.

“If approved, and with the support of lenders and landlords, the CVAs will allow the business the flexibility to implement its turnaround strategy with a store estate that reflects the current UK retail environment.”

Debenhams currently trades from 166 stores across the UK via two companies, Debenhams Retail Limited and Debenhams Properties Limited.

The CVA proposals divide these stores into a number of categories:

  • For a total of 39 stores, the leases will be retained at current rents.
  • 22 stores will have rent reductions of approximately 50% until quarter one 2020, after which the stores are expected to close.
  • The balance of the chain will see varying rent reductions ranging from 25% to 50%.

All compromised leases will have mutual landlord and tenant break clauses during the five year term of the CVA.

A further seven non-retail site leases will also have varying rent reductions and early lease breaks.

For the avoidance of doubt, no stores will close on day one, suppliers will continue to be paid on time and in full, and terms of employment are not affected.

The stores in the Republic of Ireland are not affected, nor is the international business.

Debenhams needs to secure at least 75% creditor approval by value for each of the CVAs for them to proceed.

Detailed proposal documents will be made available to creditors via a dedicated website today.  The creditors will vote on the CVA on 9 May 2019.

Consultations have already taken place with key creditors and KPMG will spend the coming weeks in further talks with key creditors to ensure they understand the full detail of the proposal.

Shopworkers’ trade union Usdaw has called for urgent talks following the announcement.

Dave Gill, Usdaw national officer, said: “This is more devastating news for staff who have been working under the threat of store closures for some time.

“They have been left on the side-lines as a game of corporate monopoly has been played out in the media. It is devastating news for staff in the store closures announced to today and the threat continues in every other Debenhams store.

“We again urge the company to engage with Usdaw the trade union for Debenhams staff.

“It’s crucial that the staff and their voice should be heard and they are treated with the dignity and respect they deserve. We will continue to provide our members with the support and advice they need at this very difficult time.”

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