Debenhams reveals 42 per cent drop in profits

Caitlin Morrison
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British Retailer Debenhams Opens First Australian Store
Debenhams' profits took a hit over the past year (Source: Getty)

Debenhams has announced a huge drop in profits in its full year results.

The figures

Profit before tax was down 42 per cent in the year to 3 September, dropping from £101.7m to £59m. The dramatic decline was largely due to an exceptional charge of £36.2m relating to the retailer's Debenhams Redesigned turnaround strategy. Underlying profit before tax was down 16.6 per cent, from £114.1m to £95.2m, in line with expectations.

Underlying earnings per share also fell, by 14.7 per cent, from 7.5p to 6.4p.

Gross transaction value rose slightly, up two per cent from £2.9bn to £2.95bn.

Net debt was reduced to £275.9m from £279m.

Shares in Debenhams were up more than two per cent in early trading.

Why it's interesting

The company once again cited an "uncertain" trading environment, and said trading will remain tough over the Christmas period - unsurprising, given inflation is at five-year highs, putting a squeeze on consumer spending.

Debenhams also noted that while "the impact of the UK's decision to exit the European Union cannot yet be fully quantified, a number of existing risks have already been identified as sensitive to Brexit and these continue to be monitored carefully, with appropriate levels of mitigating action being considered as details emerge".

Today's results come days after the group was accused of bullying suppliers, allegations the company has denied.

What the analysts said

The 2017 financial year "ended well from a sales perspective and the group has reported profits in line with expectations", analysts at Stifel said.

"Today’s statement shows early progress on the Debenhams Redesigned strategy and the announcement of partnership initiatives that should enhance the overall offer and are in tune with the evolving consumer environment. Lots to play for into peak," the analysts added.

What Debenhams said

"We are making good progress with implementing our new strategy, Debenhams Redesigned, and are encouraged by the results from our initial trials, as well as the number of exciting new partners who want to work with us," said chief executive Sergio Bucher.

"There is a lot to do but I am delighted with the enthusiasm and flair shown by my colleagues as we embark on this journey. I'd like to thank the whole team for delivering these results against a background of rapid change in the business.

"The environment remains uncertain and we face tough comparatives over the key Christmas weeks. However, we are well prepared for peak trading and the early signs from our activity to date confirm that we are moving in the right direction towards a successful and profitable future for Debenhams."

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