Sports Direct boss and retail tycoon Mike Ashley has penned a strongly-worded letter to Debenhams chief executive Sergio Bucher after the struggling British department store chain turned down his offer of a GBP40m (US$50.3m) interest-free loan.
The letter, which is addressed simply to Sergio, says while the predictable negative response came as no surprise, Ashley is “really concerned” that the board does not seem to appreciate the position Debenhams is in and its responsibility to shareholders.
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— Ashley Armstrong (@AArmstrong_says) December 13, 2018
“November was the worst November for retailers in living memory,” Mike Ashley continues, adding it is speculated Debenhams currently has “zero chance of survival.”
“The market is saying that you’ve got no credit insurance, advisors and the banks are telling key suppliers that they shouldn’t trade with you at a level above which they can afford to lose, the suppliers are managing themselves out of stores and, at the same time, you’re discounting product in an effort presumably to try and realise some cash,” he writes.
Shares in Debenhams plunged by more than one-fifth last month after reports emerged of difficulties with suppliers ahead of the key Christmas trading period. Meanwhile, in October, the retail group revealed a record annual pre-tax loss of GBP491.5m (US$634.3m) against profits of GBP59m the year before – the biggest in its 240-year history. The company, which operates around 165 stores, has also announced plans to close up to 50 stores as part of a turnaround plan, putting around 4,000 jobs at risk.
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By GlobalDataIn this context, Ashley says he can’t see how the headline proposal could be seen as negative in “any shape or form.”
“Sports Direct is Debenhams largest shareholder. What we are offering is a very public statement of support at a critical time for the Debenhams business. Even with the regulatory approvals that would be needed, we’re also able to provide Debenhams with a cash injection much faster than any company could possibly do a refinancing.”
In its response, Debenhams saidSports Direct’s proposal is “a clear demonstration of their willingness to support the company.”
It added: “However, as the offer came with conditions that could affect the interests of other stakeholders, while the board does not think it could accept the proposal, as presented, it has invited Sports Direct to engage as part of our broader refinancing process.”
To his end, Ashley said Sports Direct does not want to see Debenhams fail. “It’s not in our interest to see it fail, but without something changing rapidly all of the shareholders risk getting wiped out,” he wrote.
Signing off, Ashley asked Bucher to reconsider and respond by lunchtime today (14 December).
