Losses soar at Debenhams in Ireland

Exceptional costs at the Irish arm of the troubled retailer Debenhams contributed to its pre-tax loss soaring to over €20.6m last year. New accounts filed by Debenhams Retail Ireland Ltd, which operates 11 stores in the Republic, show that the company posted exceptional costs of over €18.7m.

The retailer in the Republic had posted a loss of €246,000 in 2017. Before the exceptional charges, the business had a pre-tax loss of over €1.8m, as revenues dipped 1% to €168m in the 12 months through September 1.

Its stores in the Republic include Dublin, Cork, Galway, Kildare, Kerry, Limerick, and Waterford. It also operates five outlets in the North, which are not part of these accounts. “The external economic and commercial environment is expected to remain uncertain and volatile in 2019,” the directors confirmed in the accounts.

Earlier this year, the UK-based parent was placed under the control of administrators, with the Irish business continuing to trade as normal. Debenhams in the UK had been hit by a sharp slowdown in sales, high rents, and ballooning debt, plus an acrimonious battle for control with its largest shareholder, Mike Ashley’s Sports Direct.

However, the new accounts show the Irish business carried out a strategic review in the second half of the year and revised projections for all of its stores.

This resulted in impairment costs on its stores and onerous lease charges of €13.7m after the review identified stores “at the risk of becoming unprofitable over time and others where anticipated future performance would not support the carrying value of store assets”.

The review also resulted in a non-cash impairment charge on goodwill of €3.38m. It also took an exceptional charge of €1.68m relating to the company’s so-called Redesigned strategy, including redundancies due to store restructuring.

The accounts were signed off last week, on May 28, by the directors. The directors said in the accounts that the Debenhams Redesigned strategy aims to deliver growth by becoming a “destination, digital, and different”.

It also wants to drive efficiencies by simplifying and focusing on business operations. During the year, the share of sales at the company’s bricks-and-mortar stores was 83%. The rest of sales were made online, up from a share of 14% in 2017.

Staff numbers fell last year by 81 to 1,373, while staff costs fell from €30.9m to €29.5m. The store network also employs hundreds of people working in concessionaire outlets.

The firm’s non-cash depreciation costs last year totalled €3m, while the company’s operating lease charges increased from €19.1m to over €22.4m. The company’s shareholder funds stood at €7.6m and it held cash of €2.9m.