Debenhams has slumped to its biggest ever statutory loss and revealed it is to accelerate store closures in a bid to transform its fortunes.
The department store business suffered a £495.1m pre-tax loss in the year to September 1, compared to a £59m profit the prior year. EBITDA tumbled 27.5% to £157.3m.
Debenhams said like-for-like sales fell 2.3% across the year, while total sales slipped 1.8% to £2.9bn.
The embattled business now plans to shutter up to 50 underperforming stores within the next three to five years – up from the 10 it previously earmarked for closure – following what boss Sergio Bucher described as “a tough year for retail”.
The move will result in around 4,000 job losses.
Debenhams said that, following a “comprehensive review” of its store portfolio, it would now focus its Debenhams Redesigned strategy on “up to 100 stores”.
However, the retailer has slashed its planned investment into Bucher’s turnaround plan. In its 2018/19 financial year, it has set a “revised” capex budget of circa £70m – approximately half of the amount it spent in 2017/18.
Debenhams said the cash would focus on the “priority elements” of its transformation plan.
The business insisted it had made “good progress” on those five main priorities, despite its plummeting bottom line.
It said digital sales grew at 12%, sustained its market leadership in beauty, and held its market share in fashion while “revitalising” its product proposition.
Debenhams also hailed an “improved in-store experience for customers” and the progress it had made with its cost reduction plans, which delivered savings of £12m during the year.
That progress could not prevent Debenhams plummeting into the red, as exceptional costs, falling like-for-likes and eroding margins shattered earnings.
Debenhams booked cash exceptional charges of £12.3m relating to its Redesigned strategy and non-cash write downs of £512.4m as a result of store impairment charges, lease provisions and system write-offs.
The retailer added that gross margins declined 140bps as a result of discounting in its main markets.
EBITDA in its core UK business tumbled 35.6% as a result.
Bucher 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.
He said the business was taking “tough decisions” to shutter stores “where financial performance is likely to deteriorate over time”, and insisted he would “maintain rigorous cost and capital discipline” in order to return Debenhams to growth.
Bucher added: “Debenhams remains a strong and trusted brand with 19 million customers shopping with us over the past year. Our transformation strategy is gaining traction, with positive results from new product and new formats, general acclaim for our store of the future in Watford and digital growth that is outpacing the market.
“With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future.”