Shares in Debenhams plunged almost nine per cent this morning amid fears of poor trading over the festive period.
The department store chain saw its share price tumble to 4.68p on the first day of trading in 2019, ahead of an update due on 10 January.
The sliding shares suggest investors have low expectations for the company’s Christmas trading.
“Pictures on social media of the retailer’s messy shelves and the usual widespread discounts on goods people don’t really want in the first place would suggest that Debenhams continues to be stuck in a rut,” said Russ Mould, investment director at AJ Bell.
Retail shares took a hit in December after a profit warning from online retailer Asos sparked a sell-off of fashion stocks across Europe.
Investors will be keeping a close eye on upcoming trading updates for an indication of how much retailers have struggled over the Christmas period.
Clothing retailer Next will release its trading update tomorrow, while Marks & Spencer, JD Sports and Primark owner Associated British Foods are due to publish their festive figures in the coming weeks.
Marks & Spencer is currently the third most-shorted company in the UK, with funds in short positions holding 11.2 per cent of its shares. Investors are also betting on shares in Debenhams and Pets at Home to fall, with short sellers holding 10.3 per cent and 8.8 per cent of their shares respectively.
Patrick O'Brien, retail analyst at Global Data, warned poor trading over the Christmas period could have devastating results for retailers in 2019.
“A weak Christmas is what can send them over the edge,” he told City A.M. “They need to have pulled in the cash that will pay rents and rates and get them through to next Christmas.”
Debenhams, which has seen its value fall to £57m, has announced plans to close 50 stores across the UK in an attempt to cut losses.
The falling shares come as Debenhams struggles to adapt to challenging retail conditions. In its 2018 annual report the chain reported a loss of £491.5m, the worst in its history.
The company has also been locked in a public dispute with Sports Direct owner Mike Ashley, who holds a 30 per cent stake in the retailer.
Ashley slammed the Debenhams board for rejecting his offer of a £40m loan, a move that was widely seen as an attempt to take control of the business.
“The UK winner of the £115 million Euromillions jackpot on New Year’s Day could buy Debenhams and still have half their money left over,” said Mould.
“However, it seems fair to suggest that wouldn’t be the best way to spend their winnings given the company is drowning in debt and has a business model which is increasingly irrelevant in the modern world of retailing.”
Last week music retailer HMV said it was entering administration for the second time since 2013, while menswear chain Greenwoods today shut its doors after 158 years of trading.