Debenhams issues post-Christmas profit warning

British department store chain, Debenhams, which celebrated its 200th anniversary on December 25, has issued a warning on profits after disappointing Christmas sales. This is the second profit warning for the high street store in less than 12  months and the department store

is thought to be the first of many retailers to report mixed Christmas trading figures.

Debenhams has warned that its first-half profits would be significantly lower than last year, and that it now expects profit before tax for the first half to be about 85 million pounds down from 114.7 million pounds in the same period in the previous year, after it was forced to slash prices in the run-up to the big day.

In a trading statement, the department store said that group like-for-like sales saw a growth of 0.1 percent in the 17 weeks to 28 December, while group gross transaction value rose by 0.7 percent. The better performing categories were beauty, home and gifting while clothing sales were weaker.

The department chain was helped by online sales, which increased by 27 percent for the 17-week period and accounting for 15.6 percent of total sales compared with 12.4 percent for the same period last year. However, online delivery income was lower than anticipated.

Michael Sharp, chief executive of Debenhams, said: "As has been widely commented on in the media, the market was highly promotional in the run up to Christmas and we responded to these conditions to ensure our offer was competitive. However, this extremely difficult environment has inevitably had an impact on both our sales and profitability.

"Looking forward, I expect conditions to remain highly competitive as we enter 2014. Everyone in the organisation is focused on improving performance and growing the business, building on the four pillars of our strategy which I remain confident will lead to success over the longer term."

The statement added that the figures were a result of the “highly competitive” retail sector and the “unprecedented level” of promotional activity that took place during the festive period, which it states was due to the declining high street footfall, as well as the continued pressure on household incomes and the impact of unseasonal weather on clothing and clothing-related sales.

Debenhams finance boss quits days after major profit warning

Following the announcement of falling sales by the troubled department store, the chain’s chief financial officer Simon Herrick confirmed his exit with immediate effect. Herrick will leave the company on February 7 after just two years in the job. He will be replaced by Debenhams' director of finance, Neil Kennedy, while the company searches for a replacement.

Sharp added: "On behalf of the board, I would like to thank Simon for his hard work and contribution over the past two years. We wish him well in the future."

Image: Debenhams Christmas campaign