Fears have been growing about the future of Debenhams, but its chairman has told the BBC the plug isn’t about to be pulled at the end of this month.
Mark Gifford says the business has been doing far better than expected and isn’t facing a cliff edge, either.
“We are sitting with over £95m in the bank, more than £50m higher than we expected to have when we went into administration.
“That’s really changed the whole complexion and prospects,” he said.
It is the first interview the company has given since the pandemic which tipped the 242-year-old retailer into its third insolvency proceedings in 12 months.
Debenhams has also recently announced plans to lose another 2,500 jobs to cut costs as it battles for survival.
Administrators are looking at a range of options, including a sale of the business. Liquidators have also been appointed as a last resort.
But Mr Gifford says there’s no need to secure a deal before the end of September as some media reports have suggested. “Because we’ve been able to build this amount of cash within the company, the administrator can work with the management team to continue to trade the business,” he said.
Mr Gifford thinks Debenhams will stay in administration until early next year before its future is sealed. The real question now is whether its current owners will stick with the business or throw in the towel.
When Debenhams first collapsed in April 2019, its lenders – a group of banks and financial investors led by Silver Point Capital – seized control.
Mr Gifford admits it’s a big decision for these owners to make.
“They’re looking at how our sales are recovering. They’re looking at the available cost saving opportunities so this business has a viable future. And so they’re looking at it optimistically, but they have to take a business decision before they conclude anything.
“And we’re in our 13th week of trading (since lockdown) and it’s very early days. There’s no pressure for them to reach a conclusion given where we are. But we’ve got their support,” he said.
But the owners may not want to put their hands in their pockets. The chairman and his team will have to persuade them that Debenhams finances will be strong enough to survive.
If Debenhams can exit from administration, another restructuring is inevitable. There’s been speculation the business could emerge with 60 stores, half as many as it has now.
“Undoubtedly there will be fewer stores,” he said. “When the company went through its CVA (Company Voluntary Arrangement) in 2019 they said maybe 50 stores would need to close – they closed 20.
“Maybe there’s another 30 to close. Nobody knows the answer. We’re looking at this every day now – which stores are viable and which are not.”
One key factor is how shopping patterns settle down over the coming weeks and months. Right now, Debenhams says stores outside of major city centres are trading far better as people shop local.
“The city centre stores are really experiencing the most difficult conditions. There are less tourists around and less city workers, and that’s all contributing – whether it’s Oxford Street, Edinburgh, Glasgow or Leeds – to them trading less well than we would like.
“And for them to be long term viable stores we really do need to see a stronger recovery than what we are seeing. But elsewhere, we’re benefiting so we’re seeing some really, really strong performances in regional towns,” said Mr Gifford.
But he says the thorny question of business rates will be also be another big factor in how many stores the company keeps open. Debenhams currently has 124 shops, and once the government’s business rates holiday is over from next April, it faces an annual rates bill of about £70m, a sum the company says is no longer sustainable.
The company has launched what it describes as a test case in Swansea next month to appeal against a 12% hike in rates for its store in the city. This will be followed by three other similar tribunals in Wales, and Debenhams has lined up a further 10 cases in England.
“It’s really sad that we have to go to court,” Mr Gifford said. “It’s not just a Debenhams issue, this is a retail issue across the country. It’s really important because many of these stores are the heart and soul of our small communities. And we want to keep as many of them open. But I need the support from the government on business rates (reform) to help us reach a better outcome. “
Debenhams is still in survival mode. Its chairman can’t rule out liquidation, especially if there’s a second wave of Covid-19 and another major disruption to trading. But he believes this is very unlikely to happen.
For now, Mr Gifford insists the company has time to make the right decisions about its long-term future.