According to sources, Debenhams was facing a “cash crunch” due to some credit insurers had tightened their requirements for Debenhams suppliers.
The retailer stated that its relationship with credit insurers was valuable and all were continuing to offer cover to its suppliers. Following this, the suppliers use credit insurance to protect them from the risk of not being paid.
In addition, when insurance firms withdraw their cover or reduce it, it reflects their concern regarding the ability of their customers to pay their debts.
Euler Hermes, one lead credit insurer, is said to have reduced the amount of credit insurance it will offer to the department store’s suppliers for orders for the new season.
Debenhams statement comes a month after it released its 3rd profit warning this year, stating that full-year profits would be lower-than-expected. And so, the retailer is in the middle of a strategic plan created to minimise costs and boost sales.