Debenhams (LON: DEB) is attempting to reassure the City that its cash position is “healthy” after an insurer cut cover to suppliers of the chain.
Major credit insurer, Euler Hermes, has been understood to reduced cover following growing concerns about the group’s ability to pay bills on time and in full.
A source from the credit insurance industry source has said that the decision has been carried out in order to “avoid unacceptable risk” and was a “similar sign to what other unsecured creditors might do.”
“There are a lot of companies out there in the scene that have a more traditional property portfolio and that are exposed financially,” they added.
The department store giant has insisted that its relationship with credit insurers was “constructive.”
The group has issued three profit warnings this year and has warned that full-year profits will be lower than expected.
The group blamed “increased competitor discounting and weakness in key markets” for the fall in profits.
Debenhams has said that market conditions have been “challenging” but it has “a clear strategy in place” and plans to take “decisive actions to strengthen the business”.
“All the credit insurers continue to provide cover to our suppliers and we maintain a constructive relationship with them. It is well-documented that market conditions are challenging, but Debenhams continues to be profitable, has a clear strategy in place and is taking decisive actions to strengthen the business,” said the group in a statement.
Debenhams is the latest retailer to come under pressure. Marks and Spencer (LON: MKS) have announced plans to close 100 shops, also warning that it could be forced to close more stores.
Poundworld said on Friday that it plans to close a further 80 stores, resulting in 1,024 job losses.
Shares in Debenhams slumped six percent in early trading.
