Debenhams shares slide 7% after company denies ‘cash crisis’

Shares in department store Debenhams fell as much as 7 per cent in early trade on Monday after the high street retailer denied it was in a “cash crisis.”

Two credit insurers, Atradius and Coface, have refused to cover some new suppliers to Debenhams, while a third, Euler Hermes, reduced cover more generally, the Sunday Times reported over the weekend.

Suppliers often take out insurance against the risk that a company, such as Debenhams, goes out of business before it pays for their goods. Without this insurance, suppliers can ask for payment up front, which squeezes a retailer’s cash position. However, Debenhams said on Monday it had a “healthy” cash position and that all three insurers were still providing some level of cover to its suppliers.

A spokesperson 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.

Debenhams has issued three profit warnings already this year, blaming a challenging market and “competitor discounting,” with shares sliding 60 per cent already this calendar year. In June, the retailer said it did not anticipate the difficult trading conditions to change in the near future.

In April, the group revised up the cost of its three year restructuring strategy from £55m to £85m, of which it said about £50m would be cash costs. In the six months to March, the group’s net cash generated from sales fell 27 per cent.


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