Debenhams shares slide as the ailing department store chain refutes reports of credit insurance problems
- The department store chain’s share price fell more than 5% to less than 14p
- It follows reports that credit insurers have tightened their terms
- Debenhams denies the reports and insists it is in a ‘healthy’ cash position
Debenhams’ share price sank 5 per cent as markets opened this week following reports that some credit insurers had reduced cover for its suppliers.
The tumble left the ailing retailer’s shares at just shy of 14 pence, as investors took fright at the disclosure and concern around the health of mid-market department stores mounts.
On Sunday, Debenhams denied reports that it was facing a ‘cash crunch’ and said its cash position was ‘healthy’.
Its defence came after The Sunday Times said credit insurers – including Euler Hermes, Atradius and Coface – had tightened their terms for Debenhams’ suppliers.
Debenhams, which has around 180 UK stores, has issued three profit warnings this year
But the retailer insisted its relationship with credit insurers, which protect suppliers from the risk of not being paid, was ‘constructive’ and all were continuing to provide cover.
A Debenhams spokesman said: ‘Debenhams has a healthy balance sheet and cash position. 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.’
Reduced or pulled cover has previously been the kiss of death for some struggling firms.
Nervous insurers deemed Maplin suppliers too risky to cover at the end of last year, meaning the retailer had to pay for stock upfront and struggled to fill its shelves during the critical Christmas trading period.
The situation is said to have contributed to the electricals firm’s ultimate demise in February.
Today’s share sink marks a fresh blow to Debenhams, which has issued three profits warnings this year.
The retailer suffered a 1.7 per cent drop in like-for-like sales over the 15 weeks to mid-June, and said ‘below plan’ trading forced it to lower its profit expectations for the year.
CEO Sergio Bucher (pictured) is implementing his ‘Debenhams Redesigned’ strategy in attempt to turn the retailer’s fortunes around