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Cash Crisis for Debenhams?

16 July 2018

Cash Crisis for Debenhams?

The share price of <g class="gr_ gr_39 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins doubleReplace replaceWithoutSep" id="39" data-gr-id="39">British</g> retailer, Debenhams Limited, has fallen by 7%, following rumours that their creditors have altered or tightened insurance cover terms. Large creditors, Euler Hermes, Atradius and Coface, are said to have tightened their terms, including refusing to cover new suppliers.

Credit insurers protect suppliers against the potential risk of not being paid. When creditors alter their cover, it implies they are uncertain about how able the company is to pay back any debts. This suggests a challenging financial situation.

However, a spokesperson for Debenhams denies this claim. They’ve stated how the company currently have a ‘’healthy financial position’’ and have ‘’constructive relationships with credit insurers, who are continuing to cover suppliers’’. This was released just a month after the issuing of a third profit warning for this year, stating that the full year profits would be lower than expected.

Debenhams have a clear strategy along with strong, decisive actions to aim at strengthening the company. Chief executive, Sergio Butcher, looks to place more emphasis on the companies’ online presence, as well as on food and beauty. This is all happening whilst the company are in the middle of a turnaround, to cut costs and boost sales, with talks of Danish chain, Magasin du Nord, and a small printing business, being sold to raise cash.

Debenhams <g class="gr_ gr_50 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace" id="50" data-gr-id="50">are</g> not the only retailer struggling. Many big high street names have announced problems in the recent months, with Poundworld, Marks and Spencers and New look, but to name a few.  The John Lewis Partnership <g class="gr_ gr_59 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace" id="59" data-gr-id="59">are</g> closing five Waitrose stores, as well as announcing no profit is likely to be made in the first sixth months of the year. Additionally, rival House of Fraser announced in June the closure of 31 of their 59 UK stores. Competitor discounting, particularly from House of Fraser, is putting Debenhams under pressure. Conditions are also suffering due to higher business costs, low consumer confidence and online competition. 

Categories: Retail

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