Debenhams warns on profit after disappointing Christmas sales
Debenhams has reported disappointing sales in the run-up to Christmas and as a result has warned that profits will be significantly lower than last year.
The retailer now expects profit before tax for the first half to be in the region of £85 million compared to £114.7 million in the same period in the previous year.
In a trading statement issued today, the department store said that group like-for-like sales edged up 0.1% in the 17 weeks to 28 December with group gross transaction value rising by 0.7%. The better performing categories were beauty, home and gifting while clothing sales were weaker.
Online sales continued to grow, increasing by 27% for the 17 week period and accounting for 15.6% of total sales compared with 12.4% for the same period last year. However, online delivery income was lower than anticipated.
Never Miss a Retail Update!Debenhams said the retail sector had been highly competitive in the period with an unprecedented level of promotional activity which it said was the result of declining high street footfall, continued pressure on household incomes and the impact of unseasonal weather on clothing and clothing-related sales.
Gross margin declined in the 17 weeks due to product category mix and higher markdown. In addition, Debenhams did not experience the anticipated final surge in sales in the last week of the period and as a result expects to cut prices further to clear stock in January and February.
Michael Sharp, chief executive of Debenhams, said: “As has been widely commented on in the media, the market was highly promotional in the run up to Christmas and we responded to these conditions to ensure our offer was competitive. However, this extremely difficult environment has inevitably had an impact on both our sales and profitability.
“Looking forward, I expect conditions to remain highly competitive as we enter 2014. Everyone in the organisation is focused on improving performance and growing the business, building on the four pillars of our strategy which I remain confident will lead to success over the longer term.”
