High street retailer avoids profits warning

DEBENHAMS HAS reported declining sales over Christmas, but said it is still on track to deliver on profit expectations.

The high street retailer saw like-for-like sales fall 3.4 per cent in the six weeks to January 5, weighed down by the UK where sales were 3.6 per cent lower due to weaker footfall.

But the group defied predictions from the City that it would issue a profit warning over the period.

Digital sales rose 6 per cent in the period, despite a slower start to the peak shopping season.

Chief executive Sergio Bucher said the results were the “best possible outcome” in an uncertain time for retailers.

The company warned that the UK trading environment is still “volatile”, with savvy consumers actively seeking out discounts.

This will result in some erosion of the retailer’s profit margin in the first half, after it slashed prices to keep up with competitors.

Mr Bucher said: “We responded to a significant increase in promotional activity in the market, particularly in key seasonal categories, in order to remain competitive for our customers.

“We have taken decisive steps to maintain rigorous cost and capital discipline, and I am grateful to my colleagues for their hard work as we maintain a rapid pace of change.”

Debenhams has embarked on a major strategic shift, including the shuttering of 50 outlets and the launch of a new store design concept.

The company said on Thursday that the new format stores had outperformed other sites.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “M&S and Debenhams both had a grisly Christmas, but managed to avoid profit warnings.

“Debenhams is really under the cosh with a heavy fall in sales, and its margin will take a hit too because it’s been forced into cutting prices to attract bargain hunters.”