Debenhams' share price falters after retailer announces drop in sales

 
Helen Cahill
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High Street Figures Released After Christmas Sales
The high street store has been facing the same problems as many other retailers (Source: Getty)

Debenhams share price fell this morning as the struggling department store posted a drop in sales.

The figures

Like-for-like sales at the UK chain fell 0.2 per cent in the 15 weeks to 11 June. Discounting the effect of currency movements, this figure adjusted to a 1.6 per cent fall in sales. Online sales grew by seven per cent in the last period.

The retailer's share price are down 5.72 per cent at time of publication to 70.00p, the largest one-day fall since December last year.

The department store will continue to grow its food business in the coming months as it opens 30 new food concessions by October.

The company said that "the overall performance has remained mixed" in its international division.

Why it's interesting

Debenhams said the trading environment was "more volatile" but that the company would be sticking to its current strategy, moving away from clothes and expanding in other areas.

Joshua Raymond, market analyst at XTB.com, said:

This is a tough trading update to read.

Like-for-like sales in the last three months have deteriorated and gross margin guidance cannot be upheld. That paints a difficult trading environment for the retailer and as such, investors will demand the firm keeps a tight grip on cost.

Positively, online sales - where mobile accounts for half - grew by seven per cent, which showed continue promise and a focus in this area for the business will prove supportive to gross margins in the long term.

The company announced recently that Amazon Fashion Europe's vice president Sergio Butler will join the retailer as chief executive, suggesting Debenhams wishes to focus on e-commerce.

George Salmon, equity analyst at Hargreaves Lansdown, said:

Debenhams has become the latest casualty of poor conditions in the UK clothing market, with falling sales showing how difficult it is for retailers on the high street.

The continued growth of online sales against this backdrop reflects how shopping habits have changed, and how even high street retailers need to be on top of their game when it comes to their online presence.

Indeed, Debenhams are clearly trying to put digital sales at the heart of their strategy, and have recruited their new CEO, Sergio Bucher, from Amazon’s fashion business.

Debenhams said today that its Irish business has applied successfully for examinership after years of losses to look at restructuring options.

What Debenhams said

Michael Sharp, chief executive, said:

Our strategy remains unchanged, with further progress in driving our non-clothing mix, continuing to improve service for multi-channel customers, and offering a wider choice of products and services in under-optimised space.

In response to more uncertain trading conditions in this period, particularly in clothing, we have focused on managing stock and margins and generating cash.

In short

Brits are spending less on clothes and more on leisure - Debenhams is yet to prove it can adapt to consumers' demands.

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