Debenhams issues profits warning as sales slump in ‘volatile’ market conditions
Sales of beauty, accessories and food and drink helped to mitigate the impact of a weaker clothing market.
Department store chain Debenhams has warned that “volatile” conditions on the high street could impact full-year profits.
In a trading update, the retailer said sales slumped in the 15 weeks to June 17, with unpredictable trading and a weaker clothing market hitting the firm.
Debenhams said like-for-like sales fell 0.9% in the period, or 2.4% on a constant currency basis.
“We currently anticipate that 2017 profit before tax will be within the range of market expectations. However, should current market volatility continue, the outcome could be towards the lower end of the current range,” the company said.
New boss Sergio Bucher, who took over as chief executive last October, is attempting a turnaround of the firm and the figures show he has made some headway.
Sales of beauty, accessories and food and drink helped to mitigate the impact of a weaker clothing market, Debenhams said, with food sales rising 5%. Group like-for-like sales in the year to June 17 rose 1.8%.
In April, Mr Bucher revealed plans to close 11 warehouses and put up to 10 stores under review, in a move affecting at least 220 jobs.
His turnaround will also see the group cull in-house brands and leave some international markets, while also shifting around 2,000 staff to customer-facing roles as part of a drive to lure shoppers back to its stores.
He said on Tuesday: “As industry data has confirmed, May was a tough month for retailers and we continue to see volatility in trading week to week.
“As a result we are focused on delivering cost control and self‐help through our ‘Fix the Basics’ plan. We continue to build good foundations for longer term growth.”
Inflation, which has soared since the Brexit vote, hit its highest level for nearly four years in May at 2.9%, tightening the squeeze on consumer spending and hitting retail sales.
Julie Palmer, partner at Begbies Traynor, said: “With success on the high street so inextricably linked to consumer confidence, recent news of falling credit card borrowing in May, negative real wage growth and weaker retail sales volumes all suggest a tightening of shoppers’ purse strings. Unfortunately, with Debenhams reporting volatile trading in recent weeks, it looks like the retailer is feeling the sharp end of this.”
Debenhams’ shares fell 3.3% on the news to 43p in morning trading.