U.K. department store chain Debenhams PLC on Sept. 10 issued a trading update amid media speculation that the company is in talks with advisers to explore restructuring plans that could lead to store closures.
Debenhams shares plunged more than 15% to as low as 10.4 pence in London mid-morning trading on Sept. 10 after the Financial Times reported that the company has appointed auditing firm KPMG to explore turnaround options, including seeking creditor approval for a company voluntary arrangement, the U.K. equivalent of a bankruptcy protection filing in the U.S.
The newspaper said the information came from a person familiar with the matter.
In the trading update it released, Debenhams said it expects to report pre-tax profit for fiscal year 2018 of about £33 million and EBITDA of about £157 million when it issues preliminary results on Oct. 25. The company added that it expects end net debt to be at approximately £320 million, which it said was in line with its guidance, while maintaining significant headroom on its £520 million medium-term facilities.
Debenhams also said it has continued to bolster its financial position and focus on its priority actions to mitigate current market conditions.
"The market environment remains challenging and underlying trends deteriorated through the summer months. Nevertheless, the product and format improvements we have tested are gaining traction and we are ready to scale up some of our strategic activity ahead of peak," CEO Sergio Bucher said in a statement.
Bucher added that the company has put a leaner operational structure and stronger leadership team in place to help navigate these market conditions and take advantage of any trading opportunities that might emerge.
In August, the department store chain cut its full-year profit outlook for the third time, prompting S&P Global Ratings and Moody's to downgrade the department store chain's ratings as its profitability continued to decline. It was also reported later that month that the retailer launched redundancy consultations that will put hundreds of jobs at risk.