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Could Debenhams be in administration by Christmas?

15 November 2018

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Debenhams is in real trouble, there is no doubt, and there is a risk it could go into administration

House of Fraser has all but gone from the High Street, as Mike Ashley closes more stores and it doesn't look like Debenhams is picking up their trade.  Disappointing results has led to a further slide in the shares, which are now down 90% on a year ago.  The thing is that Debenhams is making an operational proft, it just isn't much considering how large it is with  27,000 employees.  It used the last results to make a one off write down that hit the share price. 

Mike Ashley could possibly buy Debenhams in a Pre Pack Administration if it faces a cash crunch.  Credit insurers have withdrawn support for suppliers but, this is not uncommon in retail at the moment. However, the Drapers reporting has alarmed shareholders further. 

A number of retail failures in the recession, such as Woolworths and Focus DIY were the result of credit insurance issues. 

A Debenhams spokesman said: "Many suppliers don’t use credit insurance. Those that have used it historically are well aware of the current situation and work with retailers to manage things accordingly. Debenhams is well stocked for Christmas."

Sales figures on the High Street continue to disappoint and if Brexit uncertainties carry on then Debenhams will face further pressure.

However, it should be noted that it is not in the same precarious position as House Fraser in relation to debt.  House of Fraser had £1bn on debt which was clearly unsustainable, whilst Debenhams has only £200m.

Also, you can't get everything in Debenhams cheaper online as it has more own brands and collaborations with designers than House of Fraser.

Watch this space.

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