The Courier & Advertiser (Angus and Dundee)
High street profit warnings increase
There was more gloom for retailers on the high street yesterday as Debenhams and Footasylum issued profit warnings.
In its third profit warning this year, Debenhams said market weakness and competitor discounting had hit its sales.
The department store chain suffered a 1.7% drop in like-for-like sales over the 15 weeks to June 16 and said trading was “below plan” in May and early June.
The disappointing performance has forced the retailer to “reassess” expectations, with full-year pre-tax profits now set to come in between £35 million and £40m, down from previous estimates of £50m.
It marks Debenhams’ third profit warning for the year, having first slashed forecasts in January on the back of painful price cuts.
Another update in April noted earnings would be at the lower end of forecasts after the retailer was gouged by extreme weather brought in by the beast from the east.
Debenhams warned that further cost cuts were imminent, with a ramped-up efficiency drive set to focus on “self-help and prioritising cash generation”.
“We also intend to conduct a strategic review of non-core assets, aiming to focus investment behind our strategy,” it added.
Its shares fell by 2.10p to close at 17.50p yesterday.
Meanwhile, premium sports retailer Footasylum saw its stock market value fall by 52.24%% yesterday after warning over earnings and revealing a recent sales slowdown. The recently listed company said plans to ramp up investment in its stores and website was set to see more “modest” underlying earnings growth in the new financial year.
It also spooked investors by revealing that recent trading has come under pressure amid wider woes on the high street.
Footasylum sought to reassure investors that its growth plans would keep the group on track, while helping drive strong sales growth for the year.
But chief executive Clare Nesbitt said: “While our core target market of the 16 to 24-year-old consumer has proved to be comparatively resilient in a downturn, our trading since the beginning of the new financial year has undoubtedly been impacted by the widely-documented weak consumer sentiment on the high street.”
A more upbeat trading update came from value womenswear retailer Bonmarche who said its online sales had offset “disappointing” high street sales.
The group reported a 38% rise in bottom line pre-tax profits to £8m for the year to March 31, while profits were 27% higher on an underlying basis.