Debenhams warns on profits as sales fall

The under-pressure department store group now expects full-year pre-tax profits to be in the region of £35m-£40m, down from current consensus of £50.3m.

It attributed the shortfall to “increased competitor discounting and weakness in key markets” and added that “trading in May and early June has been below plan despite weak comparatives”.

EBITDA is expected to be between £160m and £165m. Debenhams plans to continue “key strategic initiatives” but is reducing its capex, so net debt should be lower than last year at around £320m, giving it headroom of £200m within its banking facilities.

It will also conduct a strategic review of non-core assets in a bid to free up investment for its strategy. 

Sales

Over the quarter, like-for-likes fell 1.7% in the 15 weeks to June 16, and 2.1% over the year to date. On a constant currency basis, they fell 2.2% and 2.6%.

Gross transaction value dipped 1.5% in the 15 weeks and 1.6% over the year so far.

One bright spot was digital sales growth, which grew 16% in the third quarter and 11.5% in the year to date.

Boss 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.

“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.”