Debenhams issued a “disappointing” interim management statement last week, according to analysts, after like-for-likes weakened over the third quarter.
Total sales for the 42 weeks to June 19 were up 8.9%. Of this, 7.8% of the growth came from Danish department store Magasin du Nord. On a like-for-like basis, sales were down 0.4% over the 42-week period, impacted by the conversion of concessions space to own-bought labels.
Singer analyst Matthew McEachran said that having been ahead 0.3% on a like-for-like basis after 31 weeks, the implied fall off in like-for-likes was about 2.5% over the most recent 11 weeks.
This period included the slowdown before and after the general election and the emergency Budget, the 1.5% negative impact of the space changes, the refurbishment of some stores and tougher comparisons. The figure was “below expectations of flattish”, said McEachran.
However, he added: “Management did not resort to increased
promotional investment and margin gains are stronger than anticipated.” Indications that gross margins for the full year should exceed previous guidance of 80 basis points would offset top line weakness, he said.
The news that Debenhams bought footwear retailer Faith’s 115 concessions and that it was ahead of schedule on its banking facility renegotiations was also welcomed.
Investec analyst Katharine Wynne said she remained a buyer of Debenhams because of “the self-help elements to profits over the next 12 to 18 months, which we believe should support the earnings outlook relative to peers more dependent on the top line outlook”.
UBS analyst Adam Cochrane said: “The third-quarter like-for-likes is likely to be the low point.”