Alarm bells ring on the High Street
Worst sales slump in 8 years Debenhams profits fall 44pc Online boom threatens jobs
FEARS over the health of the High Street intensified last night after Debenhams reported a 44pc slump in profits.
Warning of a tough Christmas ahead, the department store group said that profits came in at just £59m in the 52 weeks to September 2, which was down from £105.8m the year before.
The bleak figures came as research found retailers have suffered their worst month since the depths of the recession in 2009.
A separate report showed jobs are being lost as shoppers move online and Government policies, such as the National Living Wage, push up costs.
Analysts are now predicting the unseasonably warm weather will put a dampener on clothing sales, piling pressure on firms struggling to shift winter jumpers and coats.
However, it is hoped that the squeeze on family finances will ease as inflation passes its peak and wages rise. And business is booming at many online retailers, such as Asos and Boohoo, as shoppers splash out in the face of rising prices and subdued pay growth.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said ‘Online retailing continues to go from strength to strength.
‘Times are tough on the high street. The unseasonably good weather is likely to dent sales of winter woollies. But retailers will be hoping this shifts the timing of sales rather than eliminating them altogether. As we enter the key Christmas trading period, the retail industry is desperately in need of some festive cheer.’
Debenhams is in the middle of a turnaround plan under its new chief executive Sergio Bucher, pictured, who has so far struggled to revive the chain’s fortunes. Same- store sales in the UK were flat last year, while total group revenues rose 2pc to £3bn. The slump in profits came as the company took a £ 36.2m exceptional charge from shutting warehouses, closing two stores, axing jobs and ditching international franchises. Bucher said the firm had made progress in implementing its new strategy – known as ‘ Debenhams Redesigned’ – which has seen it develop a faster website, provide beauty treatments ments and trial new womanfriendly gyms next year.
He has also shifted around 2,000 staff to ‘customer-facing’ roles as part of a drive to win over shoppers, conducting X Factor-style interviews to assess employees on personalities and store presence.
The investment in digital has had a positive impact on mobile sales, up 57pc over the period.
Debenhams added that a 5pc rise in beauty sales and an 8pc rise in food mitigated a 0.5pc decline in clothing. But analysts fear the retailer, which typically boasts its best sales on Black Friday and in the run-up to Christmas, could struggle this festive season.
Research from the CBI found that sales are under pressure as stores feel the effects of higher inflation. Just 15pc of retailers reported a rise in business this month while 50pc said it was weaker than a year ago. The gap was the widest since March 2009.
Rain Newton-Smith, chief economist at the CBI, said it was ‘a critical time’ for the industry.
The report echoed figures from the British Retail Consortium, which showed the number of people working in retail fell 3pc in the three months to September.
Consortium chief executive Helen Dickinson said: ‘The pace of job reductions in the industry is gathering steam. Behind this shrinking of the workforce is both a technological revolution in retail, which is reducing demand for labour, and Government policy, which is driving up the cost of employment.’