Wednesday 25 April 2018

Debenhams shares plunge as it issues profit warning

Shares plunged 20pc after a profit warning at Debenhams in January
Shares plunged 20pc after a profit warning at Debenhams in January
John Mulligan

John Mulligan

Shares in department store operator Debenhams plunged 20pc yesterday after a lacklustre performance - at odds with rivals such as Next - saw it issue a profit warning.

Investors punished Debenhams after it said that like-for-like sales in its last quarter fell 1.3pc on a group basis, and that its post-Christmas sales performance was "below expectations", despite price markdowns.

However, the retailer said that its Irish outlets generated strong like-for-like growth in constant currency terms during the 17 weeks to December 30. Like-for-like sales in the UK fell 2.6pc.

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). That's well below the £83m (€93.1m) that had been expected by analysts.

"The market has been challenging and particularly promotional in some of our key seasonal categories and we have responded in order to remain competitive for our customers, which has impacted our profit performance," said chief executive Sergio Bucher.

He added: "The market dynamics we have seen have reinforced our view that we need to move even faster to implement the cultural and organisational changes needed to ensure Debenhams is in the best possible shape for today's fast-changing retail environment."

Debenhams, Britain's second-biggest department store operator which trades from over 240 stores across 27 countries, is in the midst of a transformation programme to close some stores and revamp the others.

Debenhams managed to increase like-for-like sales by 1.2pc in the six weeks to Christmas after it cut the price of gifts.

With shoppers failing to return to the stores after Christmas, it cut prices again, at a heavy cost to its margins.

The chain said its gross margin for the first half would now be down by about 150 basis points, far below its target of a 25 basis point fall for the year to September 2018.

Debenhams warned that the UK trading environment has continued to be "volatile and highly competitive", with weaker demand in some more discretionary items.

Debenhams placed its Irish operations into examinership in 2016 amid spiralling losses, as it blamed high rents and staff costs for its predicament. It exited examinership in August that year. (Additional reporting: Reuters)

Irish Independent

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