PAIN ON THE HIGH STREET

Fellow retailers take a shares hit as Debenhams issues profits warning

DEBENHAMS SHARES plunged after the retailer issued its third profit warning for 2018, saying market weakness and competitor discounting had hit sales.

The department store chain suffered a 1.7 per cent drop in likefor-like sales over the 15 weeks to June 16, and said trading was “below plan” in May and early June despite weak comparatives from a year earlier.

The disappointing performance has forced the retailer to “reassess” expectations, with full-year pre-tax profits now set to come in between £35m and £40m, down from previous estimates of £50.3m.

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’.

The latest warning – sparked by “increased competitor discounting and weakness in key markets” – sent shares down more than 16 per cent.

Fellow retailers also took a hit, sending the likes of Next down 1.4 per cent, Burberry down 2.1 per cent and Marks and Spencer Group down 1.1 per cent. Debenhams said further cost cuts are now on the cards, 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.

Debenhams executives said they are considering the sale of its Magasin du Nord subsidiary in Denmark, where it currently has six stores.

It will also look at disposing of a small in-house printing operation called Magenta, which prints materials for Debenhams and third parties and has an annual turnover of less than £10m.