Debenhams in profit warning after flat Christmas

Debenhams-St-Collins-Lane-Australian-first-storeBritish retailer Debenhams has warned its like-for-like sales have dropped after flat Christmas trading.

Group gross transaction value for 17 weeks declined (0.8 per cent); Group like-for-like sales as reported down (1.3 per cent) while group like-for-like sales in constant currency declined (1.8 per cent), including UK LFL down (2.6 per cent) and International up 2.1 per cent.

Digital sales rose 9.9 per cent, with two year growth of 22 per cent.

In October last year, the British retailer kicked off in the Australian market, launching its first local department store at St Collins Lane in Melbourne.

“The early weeks of the quarter were disappointing as the market remained volatile and competitive,” Debenhams said in a statement.

“We took tactical promotional action to improve our performance which resulted in a stronger six week Christmas period against tough comparatives, with LFL sales up 1.2 per cent in constant currency and digital growth of 15.1 per cent.”

However, the first week of post-Christmas Sale was below expectations despite further markdown investment, particularly in the highly seasonal Gift category

FY2018 profit before tax is now likely to be in the range of £55m to £65m

Debenhams said in response to competitor discounting it had managed inventory tightly through tactical promotional activity but this reflected in weaker gross margins.

“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 Sergio Bucher, chief executive of 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.”

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