Debenhams has posted record losses and said that it plans to close 50 retail stores, risking up to 5,000 jobs.
The struggling department store revealed a £491.5 million loss compared to profits of £59 million the year before.
Sergio Bucher, the group’s chief executive, said: “It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.”
“Working with our new chief financial officer Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline and to prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time.”
“With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future.”
The group currently has 165 stores and employs 27,000 people. It said that the closures will take place over three to five years.
The retailer is struggling to adapt to consumer changes, where shoppers are moving away from the traditional high street and buying more online.
Debenhams has issued three profit warnings this year and the group’s share price has dived by 75% in the past year.
Richard Lim, chief executive of Retail Economics, said: “Put simply, department stores are incredibly expensive to run.”
“The combination of too much space, inflexible leases and spiralling operating costs are set against a backdrop an accelerating behavioural shift towards online and experiences. This is eroding their profitability and changes in the business need to occur at a pace if they are to survive.”
Earlier this year House of Fraser was bought out of administration by Mike Ashley’s Sports Direct in a £90 million deal.
David Birne, business recovery and insolvency partner at H W Fisher & Company, commented:
“That Debenhams has announced the closure of as many as 50 stores and losses of £500m suggests it has done a pretty good job of keeping the reality of its dire financial situation from markets.”
“Still the circumstances Debenhams found itself in, having issued three profit warnings this year already, made restructuring inevitable. The only question was which route the chain would go down.”
“That it has taken the decision to close nearly a third of its current stores rather than take the option of putting in place a Company Voluntary Arrangement (CVA) suggests Debenhams was unable to put forward a CVA that its creditors felt able to agree to. That said rent reductions appear to have been agreed and the strategy announced today could see the chain survive.”
Shares in the group are trading +9.15% (0935GMT).