Overcast

Overcast

max temp: 11°C

min temp: 7°C

Search

Debenhams shares plunge after third profit warning this year

PUBLISHED: 09:26 19 June 2018 | UPDATED: 09:52 19 June 2018

Debenhams has issued a profit warning. Picture: Peter Byrne/PA

Debenhams has issued a profit warning. Picture: Peter Byrne/PA

Archant

Debenhams shares plunged after the retailer issued its third profit warning for 2018, saying market weakness and competitor discounting had hit sales.

The department store chain suffered 1.7% drop in like-for-like sales over the 15 weeks to June 16, and said trading was “below plan” in May and early June despite weak comparatives from a year earlier.

The disappointing performance has forced the retailer to “reassess” expectations, with full-year pre-tax profits now set to come in between £35m and £40m, down from previous estimates of £50.3m.

It marks Debenhams’ third profit warning for the year, having first slashed forecasts in January on the back of painful price cuts.

Another update in April noted earnings would be at the lower end of forecasts after the retailer was gouged by extreme weather brought in by the Beast from the East.

The latest warning - sparked by “increased competitor discounting and weakness in key markets” - sent shares down more than 16% in early trading on Tuesday.

Fellow retailers also took a hit, sending the likes of Next down 1.4%, Burberry down 2.1% and Marks and Spencer Group down 1.1%

Debenhams said further cost cuts are now on the cards, with a ramped-up efficiency drive set to focus on “self-help and prioritising cash generation”.

“We also intend to conduct a strategic review of non-core assets, aiming to focus investment behind our strategy,” it added.

Debenhams executives said they are considering the sale of its Magasin du Nord subsidiary in Denmark, where it currently has six stores.

It will also look at disposing of a small in-house printing operation called Magenta, which prints materials for Debenhams and third parties and has an annual turnover of less than £10m.

The company stopped short of announcing store closures but, as previously announced, it is still assessing whether to shutter 10 of its outlets over the next five years, a spokeswoman said.

The footprint of up to 30 of its stores may also be reduced, while the leases of 25 locations may be renegotiated as they come up for renewal over the next five years.

The spokeswoman said no job cuts are currently planned.

Capital expenditure, however, will suffer a “material reduction” in 2019.

Chief executive Sergio Bucher 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.”

However, the retail boss said he was seeing “clear evidence of progress” in online sales - which rose 16% over the 15 weeks to June 16 - while customers were responding “positively” to product improvements.

“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.”

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said the disappointing results “will be all too familiar to long-suffering Debenhams shareholders”.

He added: “Unfortunately it all feels like Debenhams is playing catch-up with an industry that’s left it behind.

“Debenhams reckoned it was heading for something like £750m in annualised digital sales at the half-year, compared to total sales of £2.3bn in 2017.

“There’s some way to go before good digital growth offsets the stresses elsewhere.

“Financial constraints are now starting to restrict Debenhams’ freedom of movement - with capex for next year being cut to protect the balance sheet.

“Mr Bucher’s going to have his work cut out turning this ship round.”

Search hundreds of local jobs at Jobs24

It is a new concept in dental care and it is being introduced at Suffolk dental surgeries.

Two Kesgrave High School students have been accepted onto a prestigious national engineering scholarship after taking part in a rigorous application process.

They were a mainstay of 1950s and 60s Britain who, in the days before 24-hour convenience stores and online shopping, provided an unrivalled doorstep service.

More people have been seriously hurt on Suffolk roads over the last 12 months 
than in each of the five previous years, according to government figures.

The Citizens Advice network in Suffolk says it is “dismayed” by council proposals to end its funding support across the county.

Millennials face an ‘impossible task’ buying a first house first home in Ipswich, with the average starter home in the town costing £60,000 more than the national average.

We rewind the clock on London Stansted Airport this week as we take a look at the UK’s fourth busiest airport back in the 1940s and 50s, when it was a base to the US Air Force.

A programme to turn around Suffolk’s special education needs (SEN) has been outlined – with an “innovative” pilot set to spearhead the measures.

A five-year-old boy from Shotley Gate has raised over £1,000 by putting on his running shoes for Children in Need.

Firefighters now believe a blaze above a high street shop in Ipswich was started deliberately.

Show Job Lists

Most read

Topic pages

Newsletter Sign Up

Ipswich Star daily newsletter
Sign up to receive our regular email newsletter

Our Privacy Policy

MyDate24 MyPhotos24