Debenhams Share Discussion Threads

[simon templar qc] 17/1/2017 11:01

Last week sales for JL hxxp://www.johnlewispartnership.co.uk/content/cws/financials/weekly-figures/latest.html

JL excluding food 3.7%.

Bear in mind new stores have increased selling space by about 4%.

Result no growth like for like imo with increased ousts.

[simon templar qc] 16/1/2017 18:20

One more point that some are missing is currency. It is correct Debenhams are better placed than JL on that front for this year, at least but inflation will cut back consumer spend whatever the price point is! Less money in pocket less to spend on clothes, food and luxuries. Don't forget petrol is considerably higher this year rates are going up and so are household energy. The lower the pound the more impact on household spend.

[simon templar qc] 16/1/2017 17:20

Unfortunately its all to do with bricks and mortar. Less people going into stores. Debenhams are attempting to introduce food, but I am not convinced that is a good ideal and cosmetic is lower margin. Haven't gotten the full hang on leases apart from they are tied into some long leases with upward only reviews!!!

Now its very well demanding lower rents but the only time that seems to work is when the business is unsustainable i.e. the company going under. Even then landlords aren't always willing to reduce the lease rent. Unfortunately the market doesn't seem to like Debs and it could well be a value trap. You go for the dividend and the business turns suddenly.

Its clearly a watch situation there will be winners and losers soon as the year progresses Begpies Traynor say there ate over 28,000 retailers under financial distress, some may be food retailers but I suspect a lot are clothes.

hxxp://www.exeterexpressandecho.co.uk/exeter-retailers-braced-for-challenging-2017-after-next-warns-of-tougher-times-ahead/story-30030347-detail/story.html

All depends now how the retail market fares, I would keep my eye on John Lewis sales figures they are out every Tuesday about midday.

[essentialinvestor] 16/1/2017 16:41

Terminated, Paul Scott who sometimes posts on ADVFN is particularly sharp on
retail- unsure whether he holds DEB or has a current
view, may be worth asking him, he also has his own blog from memory.


My caution on retail lease liabilities is predicated on increasing
migration online, so business assumptions that appeared very reasonable 2/3
years ago may look very optimistic over the next few years.
The duration of any leases in this context is relevant.

None of us have the gift of prescience, usually worth keeping in mind.

[terminated] 16/1/2017 11:03

For it was a strange reaction to better than anticipated results, especially when they over 60p a few weeks ago with a cloud of negativity hanging over them.I don't get the negativity regarding the new leases. Surely there is an opportunity to renegotiate some leases in their favour, and aren't leases part of their yearly budgets. What's all this about the leases about to come onto their books?

[essentialinvestor] 15/1/2017 11:19

Nope just giving a view isis.

If DEB stopped all physical store expansion, might be tempted to
take a small amount as a contra play.

Spending shareholders money usually much easier than spending your own
so the store roll out continues, unwise imv.

[essentialinvestor] 15/1/2017 11:04

Profitability significantly reduced from 5/6 years ago
and a share price hovering near multi year lows.

[edmundshaw] 15/1/2017 10:36

Ah, there's a cycle. There's always a cycle. Or mean reversion. Or other repeating patterns. You see them all the time in chaos pictures, the patterns that looks so appealing then suddenly cease to recur.

Best to try to think things through from the ground up in my view... or alternatively you can trust economists, brokers, chartists and astrologers... or BB posters...

[essentialinvestor] 15/1/2017 00:16

At or close to peak cycle making significantly less than 5 years ago,
in a sector facing structural challenges.

Value trap imv, and that is being very polite.

[edmundshaw] 14/1/2017 21:30

EI, quoting from the Annual Report and the conference call,

+ "Net debt/EBITDA at 1.2x (2015: 1.3x), making progress towards medium term financial leverage target of 0.5x."
+ Underlying earnings per share of 7.5p

+ Underlying profit before tax £118.2m, Net debt £279.0m, so Net debt appears to be 2.36 times pre tax profit (53 weeks), or 2.45x on a 52 week year. A worrying ratio might be around 4 to 5. They are aiming to bring it down to close to one.

+ Lease rentals are part of the ongoing business. In any case the same issue applies to rivals. Few High Street chains hold much freehold these days.

+ You also missed out the fact that they have already hedged the drop in sterling till the END OF 2017 at only 5% higher cost than last year (I trust you know what has happened to the pound), far longer than some rivals (John Lewis springs to mind).

Hope this helps...

[essentialinvestor] 14/1/2017 20:39

Net debt appears to be nearly 3X pre tax, this takes no account of lease
liabilities, and still they open more stores.
What happens during the next recession..

[isis] 14/1/2017 20:15

The debt came down by £40m last figures with promises to cut by 2 thirds - so don't see that as a big issue.

[pillion] 14/1/2017 11:45

sr2day
Ah, if only............alas; we carry too much debt

[sr2day] 14/1/2017 08:04

At this price this will be taken over sooner or later.

[harry_david] 14/1/2017 07:37

Thanks valuehunter, I have been buying these following your lead.

[thevaluehunter] 13/1/2017 22:58

I would also assume that the current market value of the forward contracts is pretty substantial given the time period and volume hedged with the current usd rate at 1.21.

[harry_david] 13/1/2017 19:06

Isis, there are lots of products, especially bigger ticket items, TVs etc where people do price comparisons. A 20% cost advantage leaves plenty for Debs even after giving the customer a 10% better price.

[isis] 13/1/2017 18:24

Well if there are currency issues it would mainly be from Dollar/Euro Countries and every business would have the same problem and price accordingly.
I doubt though that anyone will stop buying overpriced Apple products and the like.

[harry_david] 13/1/2017 14:34

It was funny when listening to the analyst call that none of them picked up on the currency question even though the CEO mentioned they had cover going forward. I think they were all fairly junior, the senior guys were probably on Tesco etc.

[harry_david] 13/1/2017 14:30

Good stuff valuehunter, that was the article I picked up on as well.

[thevaluehunter] 13/1/2017 13:37

"Andy Street said that John Lewis had hedged against currency moves for the rest of 2016 and the beginning of next year, but that further downward movements in sterling could cause higher import costs for the retailer.

Around two-thirds of John Lewis goods are imported, with around half paid for in dollars."

[essentialinvestor] 13/1/2017 13:22

May be the case isis, however DEB adding stores is la la land stuff just IMV,
stop the physical expansionary CAPEX, pay down more debt and redirect some
of the savings to their online proposition.

[isis] 13/1/2017 12:15

Yield about 6% - share price is too low.

[harry_david] 13/1/2017 11:12

Terminated, after reading valuehunters comment I checked out John Lewis, they only have currency cover through to now. If there are other competitors in same boat Debs will have a massive head start for the next 18 months