Debenhams issues profit warning following festive flop

Debenhams issues profit warning following festive flop

Debenhams has warned on annual profits after a disappointing Christmas. The retailer said full year profits would be in the region of £55 million to £65 million. Analysts had been expecting £83 million. Like-for-like sales in the UK fell 2.6% in the 17 weeks to 30th December. Things picked up over the six-week Christmas period on the back of discounting (like-for-like sales were up 1.2%), but the first week of the post-Christmas sale was below expectations.

“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,” says Sergio Bucher, Chief Executive at Debenhams. “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.”

The retailer says that early signs from its store format trials, including new ones at Stevenage and Wolverhampton and its first ‘right-sized’ store in Uxbridge, are promising. Meanwhile, improvements driven in digital performance through a partnership with Mobify will build through the coming year as further platform upgrades are introduced.

It adds: “As part of our plan to simplify and focus our operations, we have been working on a new, more flexible operating model that will result in reorganisation and restructuring activity both in our stores and in our support centre. As a result of this and a review of central costs, we expect to generate further annualised savings of c£20 million, of which c£10 million will be realised in H2 FY2018. Consequently, FY2018 costs are now expected to rise by c+1% compared with previous guidance of +1% to +2%. We are accelerating some aspects of our strategic plan to deliver a long term sustainable future for Debenhams and continue to review activities that could be more rapidly and profitably delivered through partnerships.”

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