Economy

Debenhams warns on profits

Debenhams warns on profits”

British retailers are giving updates on the key Christmas trading period stretching from "Black Friday" on November 24 to clearance sales in early January.

Group like-for-like sales in constant currency declined (1.8 per cent), including UK LFL down (2.6 per cent) and worldwide up 2.1 per cent.

A combination of digital sales and "tactical" discounting provided stronger sales for Debenhams ahead of Christmas, although sales fell in the longer-term.

Debenhams also warned that if tough trading conditions persist, its full-year, pre-tax profits are likely to be between £55m and £65m (€61.6m and €73m).

Debenhams PLC on Thursday reported a drop in same store sales in the key 17 weeks trading period to December 30, as a weak early start to the quarter was offset by a stable performance over the festive Christmas period. That's well below the £83m (€93.1m) that had been expected by analysts. The profit alert comes just a day after Next in contrast upgraded its profit outlook after better-than-expected trading in its directory and online arm.

Debenhams said it is working on a more flexible operating model to simplify and focus its operations, which will involve reorganisation and restructuring activity in its stores and support centre.

This came after profits for the year to last September slumped 44% to £59m.

The department store's share price crashed as much as 18% at the open in London:Markets Insider
The department store's share price crashed as much as 18% at the open in London:Markets Insider

In April a year ago, Bucher announced plans to close 11 warehouses and put up to 10 stores under review, plunging at least 220 jobs into uncertainty.

Sergio Bucher, the company's chief executive, said that because of how challenging the market was, Debenhams had been forced to offer promotions in order to stay competitive, which had directly hit profits.

Despite this, he insisted the retailer was seeing "positive early signs" from his turnaround.

Debenhams plans to accelerate cost-cutting in areas such as sourcing, rent and rates.

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".

Debenhams said it was forced to cut prices to keep up with competitors in a hard run-up to Christmas, with the early weeks of the festive quarter particularly "disappointing".

It said: "The early weeks of the quarter were disappointing as the market remained volatile and competitive".



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