This article is more than 1 year old

This article is more than 1 year old

Debenhams shares plunged by more than a fifth on Wednesday amid fears for its financial health, as a grim year for some of the high street’s best-known names threatened to get even worse.

The 240-year-old department store chain was valued at just £65m by the end of the day, after its shares fell by 21% amid reports that it was now being shunned by suppliers. It was the biggest one-day fall recorded by the retailer for more than a decade.

The sharp decline also came after very poor weekly sales figures released by John Lewis on Tuesday. The rival department store chain said fashion and home sales collapsed by more than 11% on 2017 levels last week.

Last month Debenhams revealed plans to shut up to 50 stores and wrote off the value of its brand and the cost of unwanted shop leases and IT systems – resulting in a £500m loss.

The shares lost more than 21% – closing at just 5.27p – on reports that some of its suppliers have turned against the company. Twelve months ago the shares were changing hands at 40p and five years ago they were more than 100p.

Two London-based suppliers have cut ties with Debenhams while another has reduced the amount of business it does with the chain, according to fashion trade magazine Drapers.

Their decision was reportedly triggered by a decision made by credit insurers to reduce the protection they provide for suppliers to cover their costs in the event that Debenhams goes bust and is unable to pay them.

Reducing the amount of cover available to Debenhams suppliers indicates that the credit insurers, which have extensive experience of the retail market, believe the chain is at risk.

The move comes just weeks after credit ratings agency Moody’s downgraded its long-term outlook for Debenhams and increased its “probability of default” rating, which assesses how likely it is that the company will be unable to pay some or all of its debts.

“They owed us so much money at any one time, we decided it was too risky,” one supplier told Drapers.

“It’s not worth it. I know other suppliers are nervous about going forward with Debenhams, [and] we were in the same boat. It could be a disaster for them.”

Another supplier said they had become more cautious recently after taking a financial hit on the administration of Debenhams’ fellow department store House of Fraser.

Debenhams did not deny the reports, but a spokesman said: “Many suppliers don’t use credit insurance. Those that have used it historically are well aware of the current situation and work with retailers to manage things accordingly. Debenhams is well stocked for Christmas.”

Several household name businesses have run into severe financial difficulty or collapsed altogether so far this year, at a cost of 85,000 jobs, amid torrid conditions caused by factors such as business rates, rising wage costs and online competition.

Toys R Us, electricals firm Maplins and Poundworld all collapsed into administration earlier this year, while Evans Cycles and House of Fraser were bought out of administration by Sports Direct, putting jobs at risk.

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Other firms have taken emergency measures to avert failure, such as shutting loss-making stores via a company voluntary arrangement, which typically also involves landlords reluctantly accepting lower rents.

Mothercare, Homebase and New Look have opted for CVAs, contributing to one of the worst periods in living memory for the high street.