Mike Ashley, the Sports Direct chief executive, has pushed the chairman and chief executive off the board of Debenhams by voting against their reappointment at the company’s annual meeting on Thursday.
Terry Duddy, the senior independent director, will become interim chairman, replacing Ian Cheshire. Former Amazon executive Sergio Bucher will continue to run the company, but will not sit on the board.
The dramatic development comes after growing frustration at the management of Debenhams on the part of Sports Direct, which has a 29 per cent stake in the department store group. Landmark, another substantial shareholder, also voted against the reappointments. Only around two-thirds of the issued capital was voted, meaning the dissenting votes carried more weight.
At the time of Sport Direct’s own interim results in December, Mr Ashley revealed he had offered to lend the struggling department store group £40m to help it refinance itself, and said its refusal to engage “makes you want to blow your brains out”. However, Sports Direct has no board representation at the company, and accounts for Debenhams as an investment rather than an associate.
Sir Ian became chairman in April 2016, having previously been chief executive of DIY conglomerate Kingfisher. He is also a non-executive at Barclays. He was joined by Mr Bucher later that year.
Since then, the stock has lost roughly 90 per cent of its value following a series of profit warnings, and pre-tax profit has fallen from more than £100m to £32m.
The announcement of Sir Ian’s resignation was made after the market closed but the company’s shares had already ended 15 per cent lower after a disappointing update on Christmas trading. Debenhams shares rebounded 3.6 per cent when trading opened on Friday morning.
The value of Debenhams’ 2021 bonds fell to 53p in the pound on Thursday. As recently as October last year, they were trading at above 90p.
Mr Bucher launched a new strategy, called Redesigning Debenhams, in April 2017. It aimed to increase digital sales, close underperforming stores and reduce reliance on price promotions.
However, the downturn in consumer sentiment and a rapid shift to shopping online, coupled with expensive and inflexible property leases, left the company fighting for its future.
“Their operational gearing was a issue, in that they started with low profitability,” said one analyst who follows the company. “However, I don’t think he [Bucher] was especially engaged by the magnitude of the problems until recently.”
The analyst said the coup sent a signal that Mr Ashley would now block any course of action at Debenhams that he did not approve of. He has previously urged the company not to sell its Danish operation and not to pay a dividend, advice that has belatedly been followed. His intervention may also make it more likely that the company pursues a company voluntary arrangement to reset its onerous lease obligations.
Sports Direct can only launch a full takeover offer for Debenhams under certain circumstances, after it issued a statement in September saying it would not do so. The restrictions come to an end in mid-March.