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Debenhams chairman out, CEO off board after trading update

Struggling UK department store Debenhams has reported a 3.4 per cent drop in like-for-like sales over the crucial six-week Christmas trading period to 5 January 2019, after reporting a record full-year loss of nearly 500 million pounds ($886.5 million) in FY18.

Announced at its annual general meeting on Thursday, the retailer said it is nevertheless on track to deliver current year profits in line with market expectations of 8.2 million pounds profit before tax, as it continues to identify cost savings, including its plan announced last October to close up to 50 underperforming stores.

This wasn’t enough to satisfy investors, however, who voted Debenhams’ CEO Sergio Bucher off the board and chairman Sir Ian Cheshire out of the company.

Two major shareholders, Mike Ashley’s Sports Direct and Landmark Group, voted against the reelection of both Bucher and Cheshire, leading the latter to step down from the board with immediate effect. Bucher has agreed to stay on as CEO but will no longer serve on the board.

“I recognise that individual shareholders have wished to register their dissatisfaction. I would like to thank Ian for his strong leadership of the board and his contribution to the business. We wish him all the best for the future.  I am looking forward to working with Sergio. My first task is to meet with shareholders so that I understand any concerns that they may have,” Terry Duddy, Debenhams’ senior independent director, said in a statement.

The shake-up comes one day after Reuters reported that a group of lenders hired FTI Consulting to advise on restructuring the struggling department store. Debenhams has been asked for comment but had not replied at the time of this writing.

In addition to the 3.4 per cent drop in like-for-like sales over the six-week Christmas trading period, Debenhams reported a 5.7 per cent drop in like-for-like sales for the 18 weeks to 5 January 2019. The UK business was down 6.2 per cent, with international down 3.5 per cent over the same period. Digital sales grew 4.6 per cent across the period.

Debenhams said on Thursday that it may seek to bring in new sources of funding, as it faces requirements to refinance existing bank facilities in the next 12 months. In December, the company turned down a 40 million pound ($70.9 million) loan offer from Sports Direct, saying that it came with conditions that would impact the interests of other shareholders.

Sports Direct, which is owned by British billionaire Mike Ashley, acquired another struggling department store, House of Fraser, last year, after it went into administration, for 90 million pounds ($159.6 million), and some have speculated that Ashley is interested in combining the two businesses, according to Reuters.

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