Belfast Telegraph

Thursday 17 April 2014

Debenhams hit by weak Christmas

Shares in Debenhams tumbled 7 per cent yesterday after the department store group admitted weak sales of coats and knitwear had hit its margins.

Rob Templeman, the chief executive, said Christmas had been condensed into just two weeks for the group after a very slow start to the peak trading period.

Its like-for-like sales fell 4 per cent in the 19 weeks to 13 January.

Analysts at Merrill Lynch, one of its joint brokers, cut their pre-tax profits forecast for the year to August by 15 per cent to £175m.

They said Debenhams "missed out on shopper footfall" after prices of its basic items crept up relative to its rivals.

They added: "Although the margin trend should recovery, lost profit cannot be made up."

Alongside Next, Debenhams has been the biggest casualty of the recovery at Marks & Spencer.

Mr Templeman said the group's strong bias on clothing had suffered from the warm winter. "New season stock is selling faster than this time last year," he said. He hopes to return to underlying sales growth in the group's second half, but admitted sales on an annual basis would be down.

Analysts at Citigroup, its other broker, said: "Much remains to be proven."

The group expects its first-half gross margins to be about 30 basis points lower. As well as the hit from poor clothing sales, this also reflects the impact from its acquisition of Ireland's Roche chain, which had a high proportion of lower-margin concession sales. It still expects to meet the three-year pledge it made last year to grow its gross margins by 100 basis points by 2009.

Mr Templeman said the sales trend had improved into December and January, which saw only a 1.3 per cent fall in underlying sales, but warned he was " cautious" about the outlook for the rest of the year.