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Debenhams issues new profit alert as trading remains tough

8:46 am, 19th June 2018

The chain said “increased competitor discounting and weakness in key markets” meant it endured “below plan” trading in May and early June, despite weak comparisons with the same period in 2017.

Debenhams said it now expected pre-tax profits for the year to 2 September to come in between £35m-£40m.

The market had been expecting an already weaker £50.3m.

It reported a 2.1% increase in group like-for-like sales during the 41 weeks to 16 June – a performance that failed to meet its own expectations.

It issued its first profit warning after poor Christmas trading – which it blamed on bad weather.

Debenhams later revealed an 85% slump in half-year profits, with the so-called Beast from the East and restructuring costs taking their toll on its bottom line in the six months to March.

A string of big name retailers have either sought help or gone to the wall since.

Toys R Us UK and Maplin were the most high profile early casualties – with Mothercare, Carpetright, Carphone Warehouse and Homebase among others feeling the strain.

Earlier this month one key rival, House of Fraser, announced a rescue plan involving the closure of dozens of stores.

M&S is also trimming its store estate as it bids to catch up in the digital sales sphere.

Debenhams said digital sales growth of 11.5% in the financial year to date was a bright spot but it would accelerate cost-cutting to help limit the impact, explaining that a “new leaner operating model will unlock further opportunity to drive efficiencies in the future.”

Chief executive Sergio Bucher said: “It is well-documented that these are exceptionally difficult times in UK retail and our trading performance in this quarter reflects that.

“We don’t see these conditions changing in the near future and, because it is our priority to maintain a robust balance sheet, we are making very careful choices about how we deploy capital.

“We see clear evidence of progress as our digital growth outperforms the market and customers respond positively to our product improvements and format trials.

“We have also put in place a leaner operational structure and made a number of important hires so that we are well-equipped to navigate the market turbulence.”

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