City analysts expect 50 per cent drop in profits for Debenhams

Debenhams Faces
Investors await Debenhams half-year results onThursday (Source: Getty)

Debenhams' profits are expected to halve in half-year results released on Thursday as the department store struggles to overcome a challenging 2017.

Analyst consensus figures estimate interim pre-tax profits of £44m, with a range of £42m to £47m, showing a 50 per cent drop from £87.8m in the same period last year. Like-for-like sales are expected to be down 2.4 per cent.

The FTSE 250 company issued a profit warning in January as it was hit by disappointing trading over the Christmas period and gave estimated full-year profits in the range of £56m to £65m.

Icy weather resulting from the so-called ‘Beast from the East’ saw many shoppers stay away during February and March and has added to investor concerns.

George Salmon, an equity analyst at Hargreaves Lansdown, said an increase of online rivals have added to already-fierce competition in the industry.

He said: “Debenhams online operation is growing, but the majority of the business is generated in its large high street department stores. Long term lease agreements on these stores mean its estate is far from flexible. Being lumbered with large high street stores isn’t really a position you’d want to be in with online taking share at a rapid pace.

“These challenges, plus an ugly profit warning after a disappointing Christmas period, have put a few question marks over the dividend and ensured the group is one of the lowest rated retailers we cover.”

According to a report by EY, 73 UK firms issued profit warnings in the first quarter of 2018. Almost one-fifth (18 per cent) of FTSE general retailers gave warnings in the first three months of this year and hit a seven-year high. Half of retailers cited increased competition in their warnings. Alan Hudson, EY’s head of restructuring for UK & Ireland, said the figures mark a “worrying omen” for the industry.