Debenhams set for CVA, to 'close 20 stores after Christmas'

By

Sandra Halliday

Published
Apr 24, 2019

The new owners of Debenhams are expected to announce a company voluntary arrangement (CVA) as soon as Thursday or Friday and to outline plans to close 20 of its stores after the key Christmas trading period.

The company is set to close more stores over the long term, with up to 50 to shut in the next three years. That would leave the firm with 110 still trading, which means it would remain the UK’s biggest traditional multibrand department store chain.

The CVA/closure plans were reported by Sky News and haven’t been confirmed by the retailer.

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While the initial closure programme will cover only 20 sites, it’s believed that the retailer will seek rent reductions across other stores and not only at the remaining 30 that are slated for eventual closure.

High rents, combined with rising minimum wage levels and increased business rates, have been a major problem for companies with large physical store estates in a weak UK retail environment that is seeing more sales moving online.

With Debenhams plc having gone into administration earlier this month and the trading company being taken over by a group of its lenders, Debenhams now has the working capital it needed to guarantee its survival in the short term. But reducing costs linked to its stores will be crucial in helping it to a brighter further further down the line. 

Yet CVAs are a controversial way of doing this and the property sector has been hit by a wave of retailer CVAs making landlords less willing to agree to them. Debenhams needs 75% of its creditors to vote in favour of the CVA for it to pass and it’s likely that some of its landlords will vote against it.

Assuming the CVA does get through, it would likely mean more than 1,000 jobs being cut, analysts said.