Debenhams Share Discussion Threads

[simon templar qc] 02/3/2017 10:25

The TMF goes with walbrock..

The market is 50/50 at the moment saying hang on for the dividend. We will see.

What I see is struggling sales and falling margins and then a rethink on dividend.

[harry_david] 02/3/2017 10:19

I'm on Terminated's side. At the current price all the long term negatives are accounted, whilst the £50 million currency cushion will see a much better result this year than forecast..

[mreasygoing] 02/3/2017 08:59

I'll be buying when they hit 20p.

[terminated] 02/3/2017 08:44

At the end of the day the market cap is about 650m. Last year they made a post tax profit of about 94m, subsequently the market cap was averaging about 1 billion, which is fair enough. For these to substantiate this price on fundamentals, profits would have to collapse to about 65m post tax. it is highly unlikely this will happen this year or next, especially as they have edged their dollar currency to around 1.50. even in a poor performance of 85m post tax these could easily rally 10-20% and still be on a very modest valuation.

[walbrock82] 28/2/2017 13:47

Simon,

I agreed with you up to a certain point, which is why I gave a share price guidance for DEBENHAMS between 35p/share to 65p/share.

I also acknowledged DEB been VERY SLOW in developing their online division (15% of T. SALES), which would eat into its cash flow.

But, DEB cash earnings have held up well (been consistently the same for ten years), until cash earnings drop like a stone, then dividends won't get cut.

[simon templar qc] 28/2/2017 10:59

John Lewis Partnership weekly sales falling...



Waitrose -0.3%

John Lewis -3.1%

Overall not at all good JL needs to see sales rise at least 4% to allow for increase in floor apace through new stores.

If JLP is the bellwether consumer spend is very much on the decline.

[simon templar qc] 28/2/2017 09:22

walbrock,

A good analysis, however the market is changing and Debenhams like John Lewis is stuck with large stores with leases and rents to deal with when some of the competition is purely on line.

Its all very well looking at history but evolution has altered the future!

The current year I see slowing consumer spend as a result of higher inflation and reduced wage rises.

Best case scenario is Debenhams just about manages to hold onto sales worse case scenario is slowing sales eat into profits and then Debenhams will have to cut dividends.

[essentialinvestor] 28/2/2017 09:11

With respect, could not disagree more about DEB as a reliable income
in retirement play, just IMV only.

[walbrock82] 28/2/2017 09:09

Thanks for the feedback guys and gals,

DEB had a rough ride because of private equity firms loading it with debt and retail investors got caught out in the enthusiasm.

IMO, DEB lost some of its reputation with investors because of it, although the blame should lie with previous management.(who got greedy, and almost destroy the company) i.e. Before private equity firm takeover, DEB's total debt = £100m. Three years later, you know what happened.

Value Trap

It may be a value trap in the short-term because the rise in input costs would squeeze margins and uncertainty of whether wages will keep up with inflation.
Also, we need to keep an eye on food and energy costs which can deter people from making unnecessary purchases on clothes and home accessories or shop for cheaper alternatives.

As for McCarthy & Stone (MCS), I need to look at the business and accounts but am not expert, IF I do the analysis. But, I did buy Taylor Wimpey once, at 10 pence/share during the great financial crisis, but sold out on 14 pence/share a few months later! (P.S. Still kicking myself for it.)

[edmundshaw] 28/2/2017 08:39

Yup, sometimes the price goes up-diddly-up-up, and sometimes it goes down-diddly-own-down... a bit like a share price on the stock market...

[pillion] 27/2/2017 21:14

walbrock8, good post and article
I hold a few DEB shares


Have you considered researching McCarthy & Stone (MCS)



Another company that has resurfaced after going private
Not holding now but purchase imminent
Cheers
Pillion

[walbrock82] 26/2/2017 17:28

For those looking for a steady income on their retirement, Debenhams looks like an interesting bet. They have the following good attributes:
-Been in business for over 200 years, so lots of experiences.
-The current dividend yield is over 6%.
-The company has been paying dividends for the past 5 years.
-The reduction in total debt from £1.9bn to £330m makes the business unlikely to go bust.
Also, debt to net earnings is less than 4 times with net interest cover close to 9 times.

However, since it got relisted in 2006, Debenhams’s operating profits declined by 67%. The company lacks behind rivals in online sales. Also, incremental sales increase been below £50m for five years.
For more read my article here:

[simon templar qc] 23/2/2017 21:39

More job losses at John Lewis.

[simon templar qc] 22/2/2017 10:14

Waitrose was up near 7% last week but John Lewis sales overall down -0.2%



Would Valentines day affect JL that much?

[simon templar qc] 17/2/2017 11:05

Quite a small spike the figures came out a surprise but reality kicking in. With business rates also going up it doesn't make good reading. Have moved my view to more downward predictions for Debenhams...

"comment on that unexpected fall in retail sales:
Consumer spending is now starting to weaken and this is bad news for the UK economy, which has been very resilient so far since June because consumer sentiment has been good. However most of this confidence, which helped send the UK to the top of the G7 for growth last year, was driven by high levels of consumer borrowing. Bank of England figures show a slowing in consumer debt between November and December and this is hitting retail sales. The trend shows spending peaked last autumn and is now sliding. Sales in January were down 0.3% from December, which in turn was 1.9% lower than November 2016. If consumer spending has hit a top, we may be in for a rough ride in 2017, especially retailers."
Neil Wilson
Senior market analyst, ETX Capital"

[simon templar qc] 17/2/2017 10:01

Retail sales figures out:

BBC Live

"Sterling sank 0.5% to $1.2414 following the surprise fall in retail sales in January - the third consecutive monthly decline. 
December's downwardly revised 2.1% fall was the second-biggest monthly fall since comparable records began 20 years ago and adds to signs that consumers are beginning to suffer from higher inflation and fears over the economy ahead of Brexit.
The pound also fell 0.3% against the euro at 85.73p." 

"End of the good news
Posted at
9:58
Ruth Gregory, UK economist at Capital Economics, says the retail sales figures has brought the recent run of resilient economic news to an abrupt end. 
"The rest of the year is shaping up to be tough on the high street, given the expected squeeze on consumers’ real pay growth. Not only did the volume of retail sales drop by a monthly 0.3% (compared to the 0.9% pick-up expected), but the hefty fall in the previous month was revised from -1.9% to -2.1%.
"This left the annual rate at 1.5%, down sharply from 4.3% in December. Indeed, very strong monthly rises, in excess of 2%, over the next two months would be required to prevent retail sales from dropping in the first quarter and dragging on GDP growth."
.

[simon templar qc] 14/2/2017 18:22

Thanks Pillion I am just trying to keep a balanced view, I think there is risk on downside and short term share price will bounce about a bit either way. More visibility needed.

edit:

City AM view on JL and sector

[pillion] 14/2/2017 16:36

Interesting Simon; thanks for keeping this thread alive in spite of you obviously not holding

The last update by Debenhams I read as up-beat

I feel confident that when the Interims are announced mid April the divi will be maintained

[essentialinvestor] 14/2/2017 14:02

Simon, out of interest do you have any view KGF?. Thanks.

[simon templar qc] 14/2/2017 13:42

John Lewis sales last week good, but down this week, same in Waitrose. JL blaming Valentine's day later but footfall and sales falling lately..



Motley F published a recent article, say sell good dividend shares which has included Debenhams, they cite earrings falling 12% this year 9% next. Looks like dividend could be at risk.

[edmundshaw] 09/2/2017 21:39

Lipstick, sofas, what's the difference eh?