Debenhams has insisted it has a “healthy balance sheet and cash position” after credit insurers withdrew their cover to suppliers of the retailer.
According to The Sunday Times, Euler Hermes reduced its cover amid concerns Debenhams was struggling to pay its bills in full and on time.
Other credit insurers Atradius and Coface have also reportedly refused to cover new shipments for Debenhams in recent days.
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However, Debenhams maintained that is still had “regular and constructive dialogue with credit insurers”.
Suppliers purchase credit insurance to ensure their losses would still be covered should a retailer collapse.
The firms that provide the insurance can either hike the prices or remove cover entirely if a retailer looks likely to fail before it can pay its creditors.
In those events, suppliers can demand payment upfront, putting strain on a retailer’s working capital.
This year alone, credit insurers have withdrawn cover on Poundworld, House of Fraser, New Look and The Original Factory Shop.
These retailers have all since launched a CVA, and in the case of of Poundworld, filed for administration.
Last month, Debenhams issued yet another profit warning and announced plans to offload its Danish department store fascia Magasin du Nord to shore up its finances.
Debenhams blamed competitor discounting and market weakness when it issued its recent profit warning.
The department store retailer said the challenging market conditions resulted in “below plan” trading in May and early June, despite weak comparatives, forcing it to “reassesses” expectations for the remainder of the year.
The chain now expected full-year pre-tax profits to come in between £35 million and £40 million, down from previous City estimates of £50.3 million.
That range also compares to £150 million five years ago.
Debenhams said this meant further cost cuts were now on the horizon, as it strives to focus on “self-help and prioritising cash generation”.
While no store closures nor job cuts were announced amid its profit warning, the retailer was still planning to review the future of 10 of its stores over the next five years, as previously announced.
The review forms part of the Debenhams Redesigned strategy, which was first announced last year and includes a footprint reduction of up to 30 of its stores, new customer experience initiatives, and partnership deals with external firms.
In addition, the leases of 25 locations may be renegotiated as they come up for renewal over the next five years, and earlier this year, 320 store management roles were identified for redundancy.
The news comes amid a tumultuous time for department store retailers in the UK.
House of Fraser’s CVA includes plans to close 31 of its 59 stores and make 6000 jobs redundant, while John Lewis warned that earnings this year would be “substantially lower” than last year.
Meanwhile, Marks & Spencer plans to close more than 100 stores by 2022 and has slowed down its Simply Food expansion.
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