Debenhams hit as sales chilled by cold spring

Kasmira Jefford
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DEBENHAMS’ chief executive yesterday defended the department store group’s performance as “creditable” in light of the volatile trading climate and poor weather, after third quarter sales fell short of expectations.

Like-for-like sales were flat in the 16 weeks to 22 June compared with a rise of 3.1 per cent in the first half of the year and below analyst forecasts for about two per cent growth.

“We consider this to be a robust performance in a market which has been impacted by the weak consumer environment as well as poor spring weather which dampened demand for new season ranges,” chief executive officer Michael Sharp said.

“Any retailer that you speak to will tell you that it’s not easy out there,” he said, adding there was nothing to suggest a pick-up in consumer sentiment.

Debenhams published a graph to illustrate like-for-like sales swinging wildly from one week to another, and correlating with changes in weather.

But Sharp pointed to market share gains in key categories, including womenswear, menswear, and beauty.

Furniture sales performed strongly, particularly through its website, and the retailer hopes to expand its presence in the homeware market.

Total sales rose one per cent while online sales jumped by 40 per cent and account for 14 per cent of the business.

It plans to launch next day delivery to homes in September and to grow its collect from store offer, which Sharp said “was not big enough”.

The group also revealed it will create an extra 430 jobs at its Oxford Street flagship store as part of its £25m refurbishment programme that will also include a restaurant and a cafe.

Analyst views | Were Debenhams’ third quarter figures in line with expectations?

Volatile weather has affected trading patterns and Debenhams has also provided a now standard issue graph of weekly sales volatility. There is no real surprise in this pattern, though this is likely to be below market expectations for the second half (we think two to three per cent like-for-like growth).

Like-for-like sales over the second half to date are below market expectations, although significant cost savings mitigate the profit effect to leave performance in line with the consensus range. Debenhams has gained market share in most categories and continues to make progress against its strategic targets.

Quick action to cancel open to buy stock commitments and shrewd tactical promotions have resulted in a better gross margin and cost performance in otherwise difficult trading conditions that saw like-for-like sales flat in the third quarter. We remain confident that Debenhams will continue to gain market share.