Poor post-Christmas sales along with a “disappointing” start to the holiday quarter marred Debenhams festive performance, in contrast to the upbeat report from fellow high street stalwart Next on Wednesday.
The difficult UK market weighed on the retailer, sending group like for like sales down 1.3 per cent for the 17 weeks to December 30 from a year earlier.
Debenhams said promotions had become increasingly important in a competitive marketplace, prompting it to take “tactical promotional action” to shore up the six-week Christmas period after a worse than expected start to the period. But customers stayed away from the “highly seasonal Gift” category after the festivities were complete, with the first week of post-Christmas sales “below expectations” despite bigger markdowns.
That will have an impact on margins, Debenhams said, which are expected to be 150 basis points (1.5 percentage points) lower in the first half than the same time a year ago — considerably worse than the 25bps full-year decline it predicted in October. But cost increases should come in at the bottom end of expectations, it said.
Debenhams said it had seen “encouraging indications” its turnround strategy was paying off — although profits are not expected to pick up significantly after a 42 per cent decline last year. Pre-tax profit is forecast to be between £55 and £65m for the 2018 financial year, the retailer said on Thursday– roughly in line with last year’s £59m.
Sergio Bucher, Chief Executive of Debenhams, said:
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. Nevertheless, we are seeing positive early signs from the changes we have made as part of our Debenhams Redesigned strategy. 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.