Cost cuts needed by Debenhams to protect profits after price slash
london — British retailers endured their worst Christmas since the depths of the financial crisis a decade ago as cautious customers forced high street stores such as John Lewis and Debenhams to slash prices to shift stock.
With parliament in deadlock less than three months before Britain leaves the European Union, consumer spending is fading fast, exposing the weakness of many major retailers who are having to work ever harder to win sales and also adapt to the migration to online shopping.
Many Britons reined in their spending in November before leaving it late to shop for Christmas gifts in December.
“This comes despite some retailers desperately attempting to generate sales through slashed pricing, which has seemingly not been enough to encourage shoppers,” said Paul Martin, a partner at accountants KPMG.
Trading updates released on Thursday showed that Marks & Spencer suffered another quarter of falling underlying sales in both clothing and food, while department store Debenhams is looking for fresh funding after its sales tumbled.
John Lewis, the employee owned biggest department store, said demand for beauty products and women’s clothing had enabled it to nudge up sales but its gross profit margins remained under pressure
Many Britons reined in their spending in november before leaving it late to shop for Christmas gifts in december. —
in the “intensely competitive pricing environment”.
“I would say that on average the promotional activity was something in the region of 20 to 30 per cent higher than last year,” Paula Nickolds, managing director of John Lewis department stores, told reporters.
Debenhams chief executive Sergio Bucher said the country’s second biggest department store group would have to find another £80 million of costs to cut in order to protect its profits after slashing prices. “The market in general has been very, very competitive,” he told reporters.
Tesco, Britain biggest retailer, emerged as one of the few winners from the festive period after its own-brand basic ranges combined with premium offerings to fend off rivals at the top and bottom of the market, and keep its tills ringing.
It attracted 125,000 more shoppers to its stores this Christmas than last, with December 23 the busiest Sunday in Tesco’s history. In just one hour it served 766,000 customers. The solid performance stood in contrast to rivals Sainsbury’s and Morrisons, which both missed Christmas sales forecasts this week. —
£80m