The Courier & Advertiser (Angus and Dundee)
Investors take fright as Debenhams sales slip
HIGH STREET: Millions wiped off retailer’s market value after poor festive trading leads to profits warning
Department store chain Debenhams saw its shares slump by as much as 24% yesterday as it warned over profits after being forced to slash prices to boost flagging festive sales.
In a trading update brought forward from next week, the retailer said UK like-for-like sales tumbled 2.6% in the 17 weeks to December 30, with overall group sales down 1.8%.
It said “tactical promotional action” helped group sales improve over the six-week Christmas period, rising by 1.2% on a like-for-like basis, but it saw worse-than-expected trading in the first week of the post-christmas sales.
Debenhams warned that “should the current competitive and volatile environment continue” into the second half, full-year profit before tax is likely to be in the range of £55 million to £65m.
Analysts had pencilled in annual profits of around £83m.
Shares in Debenhams slumped nearly a quarter at one stage before settling around 15% lower in the morning.
The update weighed on rivals including Marks & Spencer, which will reveal its festive trading performance next week, which saw its shares drop 2%.
Next also fell 2% despite it coming just a day after the retailer upgraded its profit outlook after better-thanexpected trading in its Directory and online arm.
Debenhams said it was ramping up cost savings, with around another £10m earmarked for this financial year and £20m extra annually under a reorganisation being led by chief executive Sergio Bucher.
The group insisted there are no more stores being earmarked for closure, but said the shop estate remains under review.
Mr Bucher, who took over a year ago, revealed plans in April to close 11 warehouses and put up to 10 stores under review, in a move affecting at least 220 jobs.
This came after profits for the year to last September slumped 44% to £59m.
On announcing the latest trading woes, Mr Bucher said: “The market has been challenging and particularly promotional in some of our key seasonal categories and we have responded in order to remain competitive for our customers, which has impacted our profit performance.”
However, he said there were “positive early signs” from his turnaround.
Mr Bucher added: “The market dynamics we have seen have reinforced our view that we need to move even faster to implement the cultural and organisational changes needed to ensure Debenhams is in the best possible shape for today’s fast-changing retail environment.”
Debenhams plans to accelerate cost cutting in areas such as sourcing, rent and rates and generally in its shops.
On the impact on jobs of the restructure, Mr Bucher said: “There will be some jobs that will go – we’ll be creating jobs as well. That’s what happens when you reorganise teams.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Strong growth for its digital offering has failed to save Debenhams from a miserable end to the year.
“Debenhams has been forced to cut prices to persuade shoppers to part with their cash, and as a result margins have been squeezed, profits have been significantly downgraded, and the share price has taken a massive hit.”
Shares closed 5.24p down at 30.34p.