Debenhams issues profit warning
The Debenhams department store chain has issued a profit warning after reporting that its UK business was severely disrupted by snow in January.
In a trading update issued today, Debenhams said that while group like-for-like sales grew by circa 3% in the 26 weeks to 2 March 2013, like for-like sales were down around 10% in the snow affected period of 14 to 27 January.
The retailer added that promotional events in February did not fully recover the sales lost to the snow and that sales were mainly in lower margin clearance lines. As a result gross margin for the first half will be circa 20 basis points lower than last year with gross margin for the year now more likely to be flat than the 10 basis points increase previously guided to.
Debenhams now thinks that first-half profits will be about £120 million, which is less than hoped. However, the retailer said that its forecasts for the second half were "robust", with sales continuing to grow as expected.
Michael Sharp, chief executive of Debenhams, said: "Whilst the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered. We are confident in our spring/summer ranges and that we can grow sales in the second half. Our strategy to build a leading international, multi-channel brand remains on track and we continue to focus on the four pillars of the strategy and investing in our business for long-term, sustainable growth."
Debenhams will report its results for the 26 weeks to 2 March 2013 on 18 April 2013.
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