Debenhams Regulatory News (DEB)

Economic Environment

Continuing adverse economic conditions

A decline in sales on discretionary purchases leading to a reduction in profit and cash flow alongside a material adverse effect on Debenhams' results.

The board conducts strategic business reviews which ensure that management is focused on key priorities and cost control. These reviews also focus on the Group's strategy to make shopping confidence-boosting, socialable and fun.

The continued volatility of the consumer environment and the ongoing economic uncertainty that has followed the UK vote to leave the European Union makes this a risk that is monitored carefully.

No Change

Currency & Hedging

Currency fluctuations or insufficient hedging

Hinder ability to adjust rapidly to changing market conditions and impact earnings and cash flow.

Affect available cash and liquidity and could have material effect on the business, results of operations and financial condition.

Debenhams has a treasury policy in place which covers counterparty limits and hedging for interest rates, foreign exchange and energy. There is also an internal treasury function which is mandated by the board.

Debenhams closely monitors all aspects of cash management to optimise balance sheet metrics. Effectiveness is measured regularly by management through a series of KPIs.

The ongoing economic uncertainty that has followed the UK vote to leave the European Union makes this risk that is monitored carefully.

Please refer to note 22 to the financial statements for more information on this risk.

No Change

Systems Availability & Cyber Security

Systems failure, external attack of systems, or data inaccuracy.

Inability to continue smooth operations following a major incident.

Failure in the stability, integrity or availability of information systems could adversely affect Debenhams' business operations and results or could cause inappropriate decisions to be made using wrong, missing or ambiguous information.

A robust systems infrastructure is required to support the delivery of our strategic objectives which are outlined on pages 6 &7.

Information systems developments are key enablers and critical to ensuring we can compete effectively, and these monitored through a business change roadmap.

The overall governance framework has been further enhanced, and includes committees that focus on areas such as general data protection regulation and payment card industry compliance.

A business continuity policy and processes, describing roles and responsibilities across the Group, ensures an effective framework is in place to enable the recovery and continuation of normal business operations as soon as possible in the event of any disruptive incidents.

This is an increasing risk given the rising levels of cybercrime globally and the increasing reliance on information assets.

Increased

Competition for Customers

Inability to predict accurately or fulfil customer preferences or demand through competitive, economic and profitable channels.

Sales will be lower, market share will be reduced and the Company may be forced to rely on additional markdowns or promotional sales to dispose of excess or slow-moving inventory or may experience inventory shortfalls on popular merchandise.

Channel shifts away from stores to online could lead to higher operational costs within the online channel and lower profitability.

Making shopping confidence-boosting, socialable and fun is at the heart of Debenhams' strategy which is outlined on pages 6 to 19.

In developing its strategy, the Group takes into consideration market, trend and customer research, with the customer insight team providing valuable intelligence on any changes in customer priorities.

An understanding of customers and their needs is developed by listening to their views, market intelligence and reviewing KPI's which ensures that pricing is competitive and promotional activity is appropriate.

The UK exiting the European Union (EU) may generate foreign exchange rate volatility, or changes to trade agreement and duty rates, which could impede the organisations ability to compete effectively, meaning this is a risk that is carefully monitored.

No Change

Business Strategy & Transformation

Failure to deliver Debenhams' key strategic priorities

Could significantly delay or prevent the achievement of Debenhams' business plan and could have a material adverse effect on Debenhams' business, financial condition or results of operations.

Debenhams is reviewing and updating its business change roadmap to ensure the project portfolio supports the delivery of the key strategic priorities.

Management supplies detailed updates on progress within the transformational programme, which are closely reviewed by the board to ensure that management is focused on key priorities, cost control and benefit realisation.

The UK exiting the European Union may lead to loss of access to the free movement of goods, services, people and capital, making this a risk that is closely monitored.

The volume and complexity of change being implemented, its importance of the business plan, and our reliance on third party specialist resource to support delivery make this risk that is monitored carefully.

No Change

Supply Chain and Key Suppliers

Adverse events influencing either the sustainability of the supply chain or Debenhams' relationship with any of its major suppliers, service providers, international partners, designers, or concessionaires

Place pressure on margins and profitability or require the Group to divert financial and management resources from more beneficial uses.

Additional unplanned costs required to transfer operations between providers or additional operational costs from a new provider.

Changes in exclusivity arrangements with designers or any decline in their popularity.

The loss of a number of Key concession partners.

Debenhams fosters close and collaborative relationships with its suppliers. Both parties work towards the objective of optimising sustainable fulfilment and costs, which is measured regularly by management through KPIs. You can read more about how the Group builds relationships with our suppliers on pages 21 and 22.

Debenhams continues to develop its supplier base to mitigate the potential of cost price inflation without compromising the quality of its products. In addition, the sourcing division has been strengthened to include additional expertise which assists with sourcing decisions, production consolidation and lead time reduction, amongst other things.

This is an increasing risk given the uncertainty around future trade agreements and duty rates following the UK decision to exit the European Union and is an area of high management focus.

Increased

Legal & Regulatory

Events that negatively impact the reputation of, or value associated with, Debenhams' brand

Loss of stakeholder trust and confidence, including an adverse effect on Debenhams' ability to attract and retain third party brands, suppliers, designers, concessions and franchisees.

Material adverse effect on Debenhams' business, financial condition or profitability.

Forums exist to focus on specific areas of legislation, with business policies and procedures in place to ensure roles and responsibilities are understood across the Group.

Debenhams has specialist teams in place to monitor changes to legislation and standards, further supported by membership of key industry bodies to enhance awareness.

All suppliers are expected to adhere to Debenhams' own supplier code of conduct, which is underpinned by Debenhams' robust policy on compliance that includes a focus on social and ethical standards.

This is increasing risk given the uncertainty around the likely changes to UK legalisation following the UK decision to exit the European Union so it is being monitored carefully.

Increased

Property**

An adverse impact on performance from property-related events, such as store closures and business rate or rental increases.

Significant alterations in rental terms could have a material adverse effect on the business.

Disputes over store modernisations may lead to reinstatement costs and termination of leases may lead to dilapidation costs being incurred that are in addition to those provided for.

Debenhams has a specialist property team, which manages all aspects of leasehold property, including cost renegotiations, communication of the store modernisation program, lease renewals and adherence to all legal obligations under the lease.

This is an increasing risk given the potential ten store closures identified over the next five years and the risk of impairment.

Increased

Key Personnel

Loss of key management or other personnel whom Debenhams upon

Significantly delay or prevent the achievement of Debenhams' business plan.

Material adverse effect on Debenhams' business, financial condition or results of operations.

In order to attract and retain talent, both succession and personal development plans are in place throughout the Group. In addition, target-led, performance-related incentive schemes exist.

The UK decision to exit the European Union could impact on the availability of talent in the job market and the eligibility for individuals to work in certain jurisdictions, making this a risk that is monitored carefully.

No Change