Market report: Debenhams on the rack after digital downturn

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Analysts at HSBC spelled out the challenge facing new Debenhams boss Sergio Bucher today as they warned the ailing department stores group would struggle to adapt to the digital age.

Shares in the FTSE 250 company retreated 1.15p, or 1.8%, to 62.9p as the investment bank cut its rating to reduce, concerned by the average lease lengths of its 165 UK stores, which are around 22 years.

That compares with an average of seven to eight years for Marks & Spencer and Next, which HSBC said would make it harder for Debenhams to close stores as shoppers move online.

“Debenhams has less flexibility to reduce fixed costs to adapt to a rapidly evolving, increasingly competitive omni-channel market,” the investment bank said.

It said Bucher, who starts work next month, will not be able to map out a clear plan to turn around the business before its interim results next April.

Even without having to fight BHS for customers, HSBC claimed competition will increase as rivals slash prices.

Debenhams had been tipped by analysts to profit from BHS’s collapse.

A quiet Friday for markets caused the FTSE 100 to trickle 6.10 points lower to 6852.60, with cheaper Brent crude nudging BP down 2.45p to 434.7p and Royal Dutch Shell off 6p to 1989.5p.

Shares in private hospitals group Mediclinic clawed back early falls to rise 11.47p to 975.97p even as it issued a profit warning.

Traders caught wind of a potential warning yesterday, which caused the shares to slide 3.3%.

Goldman Sachs, the so-called Vampire Squid, sucked the life out of Burberry by removing the luxury fashion group from its sustain focus list and the shares slipped 23p to 1262p. A downgrade also dragged interdealer broker Icap down 9.1p to 488.7p. 

Liberum cut its rating from buy to hold after the recent rally, incidentally being replaced as the broker’s top pick by Tullett Prebon, to which Icap is selling its voice-broking business.

Hurricane Energy took the junior market by storm, soaring 9.54p, or 39%, to 34.04p after promising drilling results from the North Sea oil explorer’s Lancaster field.

The early signs suggest Lancaster contains more than the current estimate of 200 million barrels of oil.

Eagle Eye, which manages digital discounting for supermarkets, advanced 9p to 105p as chairman Tim Mason, the former boss of Tesco’s failed United States venture Fresh & Easy, moved to the chief executive role.

Finally, Botswana Diamonds, the mining minnow run by Irish whiskey magnate John Teeling, dived 0.39p, or 20%, to 1.59p after “inconclusive results” from samples taken from its joint venture with Russia’s Alrosa.

Source Article from http://www.standard.co.uk/business/market-report-debenhams-on-the-rack-after-digital-downturn-a3341176.html

September 9, 2016 |
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