Why Mike Ashley lost money on Debenhams

I swear, literally a few months ago my mrs mentioned going to Debenhams.

Honestly, my reaction was something like “haven’t Debenhams gone bust yet?”.

Apparently not, but they’re pretty darn close it would seem.

I don’t pretend to fully understand what is going on there. I really don’t need to understand. The share price tells me everything I need to know that is going to affect my decision making.

But today in the news it looks like Mike Ashley’s 30% holding in Debenham’s plc, that he’s spent years and years building…..will be wiped out.

Ouch.

I have no idea how much £’s he’s lost in that investment.

It’s easy to say it in hindsight I know, but I genuinely don’t understand why anyone would invest in an over-expensive department retail store anymore. The future for retail doesn’t look great right now as customers now feel comfortable with the convenience of online purchasing. Some stores may survive and thrive, but I would never put Debenhams on that list personally.

It’s maybe one of the few places left that you can try on maternity clothing. But thats not enough for a company the size of Debenhams.

Everything else they sell is online elsewhere, and its far cheaper online elsewhere. The brand also doesn’t convey “premium”. So people don’t want to spend extra and show it off to their friends as there’s no association with premium for the brand. If anything, most believe its over-expensive. So it’s giving the opposite effect. Buyers look silly if they go to Debenhams and pay over the odds to show off a Debenhams label.

Put another way, if you pay £1000 for a diamond ring, you can show it off and impress others. A massive social reward. If you pay £1000 for a copper ring, you won’t get the same effect from people. They’ll think you’re nuts.

Anyway…….if you really want to know what went wrong at Debenhams there’ll be thousands of experts all willing to share their opinion with you online and on the TV. None of it will add any real value to you.

Worth noting however, my long term end of day system gave us a ‘sell’ signal on Debenhams on 10th May 2016 at 0.75p a share. Today that share price is around 0.01p.

Short sell traders would have made good money on it. I think you’d be looking at a 5R win, up until the brokers closed trading on it.

Long only bias traders would have seen that signal and simply stayed well away, investing their capital elsewhere.

The beauty of mechanical systematic trading.

No misguided opinions, no beliefs, no predictions.

You don’t need to know why the price is falling, or what Debenhams are doing wrong. But if Mike Ashley thought buying a shite-tonne of shares in Debenhams has been a good idea, it just goes to show how clueless most investors and traders are out there.

p.s. I went to Mothercare yesterday with the mrs for baby stuff. It was dead. Like a ghost town. Everything was massively overpriced. The only thing that makes them unique?…. free bra fittings.

Also, their share price in 2013 was almost as high as £5.00 per share. This morning it’s opened at £0.20p a share. I’m not one for predictions, but my systems are only showing sell signals and have been since 2014.

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About Chris Chillingworth

Self confessed lover of racing, american football and whiskey. Trader and Investor since 2011. Chris has now coached over +1500 traders using his mechanical systematic trading strategies and now also runs a members only watchlist of FTSE stocks.

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