Debenhams shares jumps 40% as experts react to Mike Ashley’s proposals

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Debenhams shares
// Debenhams shares spike by 40% after Mike Ashley’s boardroom proposals
// Ashley wants to cull the board, save for one member, and install himself as an exec
// Ashley already holds a 27.9% stake in Debenhams through his Sports Direct empire

Debenhams shares jumped by as much as 40 per cent this morning after Mike Ashley launched a campaign to seize control of the retailer through a clean sweep of the board and installing himself as an executive.

The embattled department store’s shares spiked to 4.3p this morning after the retail tycoon called for a general shareholder meeting to vote whether he should take “an executive role” on Debenhams’ board.

He also proposed to to remove “all of the current members of the Debenhams board”, except for finance chief Rachel Osborne.

At the moment, Ashley owns a 29.7 per cent stake in Debenhams through Sports Direct, of which he is the founder and majority owner.

Debenhams expressed “disappointment” at Ashley’s proposals.

“The board has been engaging with Sports Direct and our other stakeholders regarding options to restructure our balance sheet and is disappointed that Sports Direct has taken this action,” it stated.

“In the meantime, discussions to address our future funding requirements are well advanced.”

If successful, Ashley would then be replaced as chief executive of Sports Direct by deputy finance chief Chris Wootton in an acting capacity.

It would also cement his position as one of the most powerful players in UK retail, having already added Evans Cycles, Sofa.com and House of Fraser – Debenhams’ key rival – to Sports Direct’s retail empire.

The firm also has significant stakes in Findel and French Connection.

Laith Khalaf, analyst at Hargreaves Lansdown, said: “Such an unnecessary change of chief executive looks somewhat disrespectful to other shareholders of Sports Direct, but then those who hold the stock must surely have already come to terms with Mike Ashley’s unorthodox style.”

Neil Wilson, analyst at Markets.com, said Ashley’s latest proposals suggested an impending tie-up between House of Fraser and Debenhams.

“One wonders why Ashley does not simply go the obvious route and bid for Debenhams and combine into the House of Fraser rump,” he said.

“The rationale for tying these companies together is clearly compelling. If the coup fails, he will surely launch a takeover.

“If it succeeds he will be able to tie up the operational side and shore up finances from his own resources.

“Whether this boardroom coup fails or not, there is surely only one outcome from all of this: Mike Ashley will get what he wants.”

Aaron Shields, strategy sirector at Fitch – the agency that designed the Debenhams’ Oxford Street flagship in the 90s, which at the time was proclaimed the best department store in the world – said Debenhams was behind the times and Ashley would have a lot of work ahead of him to bring it up to speed.

“Take any person under the age of 30 into Debenhams and observe their reaction. Get them to describe what this store is for, and their blank expression will tell you everything you need to know,” Shields said.

“Department stores like John Lewis have raced to meet customer demands, building billion-pound online businesses, revitalising their assortment and brand image while repurposing their channels – shutting underperforming stores and making many hard choices.

“Debenhams has purposely decided to walk, not run. The store experience is antiquated, product assortment is bloated, store network performance is variable and online performance is middling at best.

“As a result, Debenhams is no longer top-of-mind during normal shopping visits. Poor Christmas figures now clearly demonstrate that customers aren’t thinking about Debenhams during special occasions.

“Mike Ashley needs to sharpen the axe and force these kinds of decisions through, like other retailers. It’s a great brand in serious need of rescue.”

Ashley’s dramatic boardroom proposals comes two months after he successfully led a coup to oust Debenhams chairman Sir Ian Cheshire from the boardroom. Cheshire subsequently resigned.

The coup also saw Sergio Bucher ousted from the boardroom, but he was permitted to continue carrying out his duties as Debenhams chief executive.

The news also follows Debenhams’ latest profit warning earlier this week – the fourth in just over a year.

In addition, last month it secured a cash injection of £40 million from lenders after ending the year with a historic loss, poor Christmas trading season, and speculations of a possible CVA amid already-confirmed plans to shut down up to 50 stores within three to five years – putting an estimate of 4000 jobs at risk.

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