Debenhams is to close a total of 50 stores over the next five years after announcing the biggest financial loss in its 240-year history.
The troubled retailer, which has 16 sites north of the Border, is the latest high street brand to announce a raft of closures after its annual results showed a loss of nearly £500 million against a profit of £59m a year earlier.
The department store chain has not yet said which of its outlets will face the axe, but said that as many as 4,000 jobs could be lost. Yesterday’s announcement of the closure of a further 40 stores came on top of the ten already announced earlier this year, taking its stable to around 100 UK-wide.
Debenhams said it hoped there would be a “minimum” of compulsory redundancies and that some of the departures would be people who would have left the business anyway.
Chief executive Sergei Bucher said the 40 additional stores were not yet unprofitable, but the firm’s forecasts showed they were likely to be so within the next three to five years.
He 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.
“We are taking tough decisions on stores where financial performance is likely to deteriorate over time.”
Debenhams’ results for the year to September were hit by exceptional write-downs of £512.4m, primarily relating to store and lease provisions, IT costs and impairment charges.
Mr Bucher added: “Debenhams remains a strong and trusted brand with 19 million customers shopping with us over the past year.
“With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future.”
Industry experts said that the cost base for large retailers has increased in recent years, driven by rocketing rents and business rates.
John Lewis recently warned that 2018 had been one of the toughest years, while House of Fraser has also announced it will close some branches.
Leigh Sparks, professor of retail studies at Stirling University, said: “The cost structure for large retailers has become very expensive.
“Secondly, there is an issue around department stores generally and whether the department store format can ever be as prevalent as it was. This really is about Debenhams being over-spaced.”
Debenhams is also the subject of takeover talk, with speculation building that major shareholder Mike Ashley is set to merge it with his newly-acquired House of Fraser chain.
The Sports Direct tycoon owns just under 30 per cent of Debenhams, close to the threshold at which he must launch an official takeover bid.
Prof Sparks added: “If he [Mike Ashley] does make a move for Debenhams and does put together Debenhams and House of Fraser, then the number of store closures could be considerable.”
John Moore, senior investment manager at Brewin Dolphin, said: “Debenhams results show how difficult the traditional retail sector has been over the last year and the company now finds itself in a very difficult position.”
Debenhams’s share price is 75 per cent lower than it was at this time last year.