Debenhams hit by ‘web sales threat’

DEBENHAMS shares plunged nearly 7pc yesterday after experts warned that customers are shopping on its website instead of in its stores – ‘cannibalising’ sales rather than adding to them.

Analysts at Goldman Sachs slashed their rating on shares in the department store to ‘sell’ and said the outlook for the retailer was ‘modest’ by European standards.

The report said Debenhams was ‘wrestling’ with the shift in business online and warned that sales it generates on its website are just eating into business that would have been done in its shops.

Goldman’s retail team said ‘tough times lie ahead’ for a number of companies as online sales grow – with Debenhams among the most vulnerable to changing shopping patterns. The bank’s experts added that a reduction in new shop openings in the UK does not help the chain.

Debenhams shares fell 5.75p to 79.65p. Chief executive Michael Sharp recently said he would leave next year after nearly five years at the helm.

The troubled retailer has issued a string of profit warnings over the past few years as it struggles to compete with rivals. But recent results revealed sales rose 2.1pc last year, with a 7.3pc rise in profits to £113.5m – its first rise in annual profits for four years.

It said its website was generating ‘click and collect’ sales – where shoppers order online and collect from shops – which meant extra purchases could be made in store.

The retailer has also been expanding overseas. It will open 11 new stores over the next three years.

Goldman also took its red pen to Primark-owner Associated British Foods (down 121p to 3478p), which it downgraded to ‘sell’ due to worries about profits.

But the analysts said Next (down 80p to 7935p) was an ‘online winner’ and rated the shares ‘buy’.