Debenhams shares slide as chairman ousted

–Shares in embattled retailer Debenhams fell further Friday after a disappointing sales update and subsequent shareholder revolt on Thursday ousted the company’s chairman and removed the CEO from its board

–The boardroom coup was led by Sports Direct CEO Mike Ashley and Dubai’s Landmark Group

–Debenhams has been struggling to refinance its debt and sell assets, while also reshaping its retail offerings.

Debenhams PLC (DEB.LN) shares dropped sharply on Friday in the wake of a boardroom coup which left the retailer’s chief executive without a board seat and ousted its chairman following a disappointing Christmas trading update.

The U.K. department-store chain said late Thursday that Chairman Ian Cheshire had stepped down after both he and Chief Executive Sergio Bucher weren’t re-elected to the board at its annual general meeting.

Major shareholders Sports Direct International PLC (SPD.LN) — headed by prominent U.K. retail investor Mike Ashley–and Dubai-based Landmark Group led the boardroom revolt.

Despite the shakeup, Debenhams said Mr. Bucher will stay on as CEO and report to its board. The company said the board has full confidence in his leadership and plan to reshape the business.

Shares at 1258 GMT were down 20% at 3.86 pence and have fallen 86% in the last 12 months. Debenhams, which was founded in the 18th century, is now valued at 49.1 million pounds ($62.7 million), having been valued at GBP1.65 billion at its latest stock market listing in 2006.

Terry Duddy, Debenhams’s senior independent director, was appointed interim chairman with immediate effect. He said he recognizes that individual shareholders wished to register their dissatisfaction and his first task will be to meet with investors to understand their concerns.

Earlier on Thursday, Debenhams had reported a 5.6% fall in like-for-like sales in the 18 weeks to Jan. 5 and warned that first-half margins will be hit by promotional activity. Debenhams has started talks with lenders to refinance its bank loans and put further asset sales on hold while those discussions continue, it said.

Analysts at investment bank Jefferies note that Debenhams said it couldn’t get fair value for such assets as Danish department-store chain Magasin du Nord, which it had reportedly sought to sell for up to GBP250 million. Debenhams may be considering looking for additional lenders or carrying out an equity-rights issue, Jefferies said.

"Sergio Bucher, the board, most shareholders, and even perhaps the disaffected shareholders, believe Debenhams’ strategy is the right one–an improved offer, more social shopping, fewer, but redesigned, stores–just that it needs to be implemented faster, given the market environment. To do that will require a strengthened balance sheet and much landlord support to reduce the GBP300 million occupancy bill and reinvest in chosen stores," Jefferies analysts wrote in a research note.

Debenhams has already said it plans to close as many as 50 underperforming stores in three to five years and develop a new, lower-cost approach for 20 stores. It also has a cost-reduction program in place to save GBP50 million annually.

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