Debenhams reaches deal to keep most stores open, but 7 will shut

By guest author Elias Jahshan from Retail Gazette

  • Debenhams strikes deal with landlords to keep 120 of its 142 stores open following administration
  • However, seven stores will shut, affecting 422 staff
  • Plans to close remaining 28 stores as part of last year’s CVA remains, and some of those closing now may be on that list of seven

Debenhams has struck a deal with landlords that will ensure most of its stores will re-open after lockdown in the wake of the department store’s administration last week.

Caption courtesy by Retail Gazette

The retailer confirmed with Retail Gazette that it has agreed terms on around 120 of its 142 stores.

The department store chain added that it was in “advanced talks” with landlords for the remainder of its estate and that they felt “confident” more deals will be reached in the coming days.

However, seven Debenhams stores will shut down permanently and this will affect 422 staff, all of whom have already been informed.

The stores that will not re-open after lockdown are located in Leamington Spa, Salisbury, South Shields, Stratford-upon-Avon, Truro, Warrington and Westfield London.

Debenhams warned that “a handful” of additional stores may be at risk of closure, but this was dependent on landlord conversations.

The retailer said the landlord discussions were an “important part of securing the future of the business and ensuring as many stores as possible re-open” once lockdown restrictions are relaxed.

The updates come after Debenhams appointed administrators from FRP Advisory last week and entered administration for the second time in 12 months.

Debenhams said FRP Advisory would adopt a “light touch” administration, meaning the existing management team remain in place under the direct control and supervision of the administrators.

For that reason, the retailer said the landlord discussions have been carried out “by existing management for existing owners, under supervision of administrator”.

Soon after Debenhams first fell into administration in April last year, it launched a CVA that included rent cuts of up to 50 per cent on some stores and around 50 stores earmarked for closure.

The first tranche of store closures – 22 sites – took place in January, well before the coronavirus outbreak became a pandemic and sent the UK into a state of crisis.

Debenhams said plans to close the remaining 28 stores as part the CVA remains, but some of those closing may be on that list of seven announced today.

It also stressed its intention that “there will still be a Debenhams of 100-plus UK stores” once lockdown restrictions are lifted and the administration process ends.

“I’m delighted with the progress we are making with our landlord discussions which reflects the pragmatic view the vast majority of them are taking of the current market conditions,” Debenhams chief executive Stefaan Vansteenkiste said.

“We have agreed terms on the vast majority of our UK stores and talks are proceeding positively on the remainder, positioning us to reopen these stores when government regulations permit.

“Regrettably we have been unable to reach agreement on seven stores and these will not be reopening, and I’d like to express my thanks to our colleagues in these stores at what I know is a difficult time for everyone.”

Around 13000 of Debenhams employees in the UK are currently being paid under the government’s coronavirus job retention scheme (JRS), which covers 80 % of the salaries of furloughed staff up to £2500 a month.

FRP Advisory said it was “necessary to “mothball” the business during the Covid-19 pandemic in order to seek to rescue it in the months to come. and that it wanted to continue paying furloughed staff under the JRS.

However, earlier this week lawyers representing FRP Advisory said it may be forced to make “a large part of the significant number of employees of Debenhams” redundant if it is responsible for staff wage liabilities.

This means thousands of jobs may be at risk after the High Court ruled that its administrators could be liable for furloughed staff’s full wages.

FRP Advisory has said it might pursue an appeal against the judge’s decision.

Elsewhere, Debenhams revealed yesterday that it has started the liquidation process of its Irish, Hong Kong and Bangladesh businesses.

The intention to liquidate its Irish business was first revealed in Debenhams’ UK administration announcement last week, and will affect 958 direct employees plus 300 concession staff.

Debenhams has already suspended trading in its stores across the republic, but expects the majority to not reopen.

The  liquidation process on Debenhams’ Hong Kong and Bangladesh sourcing offices will see the contracts of all 48 Hong Kong employees and 69 Bangladesh employees terminated.