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Debenhams issues profit warning

The Debenhams department store chain has issued a profit warning as it reported that like-for-like sales fell by 1.7% in the 15 weeks to 16 June following an increase in competitor discounting as well as weakness in some of its key markets.

DEPARTMENT STORES

Debenhams issues profit warning

The Debenhams department store chain has issued a profit warning as it reported that like-for-like sales fell by 1.7% in the 15 weeks to 16 June following an increase in competitor discounting as well as weakness in some of its key markets.

Group gross transaction value dropped by 1.5% in the period although online sales were up 16%.

The results meant that like-for-like sales and group gross transaction value declined by 2.1% and 1.6% respectively in the financial year to date which covers the 41 weeks to 16 June.

The retailer said trading in May and early June was below plan despite weak comparatives from the same period last year. As a result, Debenhams now expects its full year pre-tax profit to be in the range of £35 million and £40 million, with EBITDA to be between £160 million to £165 million. This compares with a current market pre-tax profit consensus of £50.3 million.

Sergio Bucher, Debenhams chief executive, said: "It is well-documented that these are exceptionally difficult times in UK retail, and our trading performance in this quarter reflects that. We don't see these conditions changing in the near future and, because it is our priority to maintain a robust balance sheet, we are making very careful choices about how we deploy capital.”

Debenhams said it will now focus its efforts on a range of actions to mitigate current market conditions and drive progress in the new financial year.

These will include aiming to deliver above-market digital sales growth driven by mobile, offering innovative customer engagement in the beauty category both in-store and online, and revitalising its fashion product with a reinvention of its Designers at Debenhams offering which is already underway.

The retailer will also be changing the in-store experience for customers through a redesigned service model and store presentation and accelerating activity to reduce costs.

Bucher continued: “We see clear evidence of progress as our digital growth outperforms the market and customers respond positively to our product improvements and format trials. We have also put in place a leaner operational structure and made a number of important hires so that we are well-equipped to navigate the market turbulence."

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