Debenhams disappoints market

DEB (Debanhams) issued its interims and strategy review today. Shares are down 3.5% to 53.35p as at writing, so not what the market was expecting.

LFL was up 0.5%, but gross margins were down 30bps. EBITDA was down 2.5%. Group profit before tax was in line with expectations, and net debt was down. So coasting along, nothing exciting to report.

Looking at my records, I bought some DEB shares in Jun 2015 at 94p, where, if I recall correctly, it had a high Stockopedia ranking. I sold in Dec 2016 at 55p. DEB seemed lackluster, and I decided to move on. I see that I hadn’t missed much.

DEB shares has been trading sideways since Jul 2016; much like its underlying business, I see. It’s fair to say that DEB’s best days are behind it, and now it just seems to bumble along. Maybe a turnaround is possible, but I suspect its long-term fate is ultimately not a happy one. There’s still some life in it yet, though.

The Stockopedia score is 74, so I would not be looking to buy. On the other hand, its value score is 98, PE is 8.6, dividend yield is 6.2%, PBV is 0.77, and EV/EBITDA is 4.22. So there’s clearly some value there if you don’t mind a bit of a wet blanket for a share.

If trading improves in the next report, then their shares should do well. On the balance of probabilities, I would say that it won’t happen, though. Things seem a bit tight retail-wise, so a sudden turnaround in fortunes seems far from a done deal.

I have not been in Debenhams in many years, and my own feeling on them was that their goods were a bit pricey.

I’m sure Paul Scott will be commenting on DEB today, and it will be interesting to see if our views match. If not, then just do what Paul says.

Meanwhile, I’m off to Curry’s today: I am interested in buying a second monitor-cum-TV for my computer. My old TV is on its last legs, and I thought I would use that opportunity to upgrade both my computing rig and my TV. I am not looking for a large TV, but I do want it to be 1080p.

But I digress.

Stay safe out there.

53.35p.

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About mcturra2000

Computer programmer living in Scotland.
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