Discount battle knocks margins at Debenhams

Kasmira Jefford
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DEBENHAMS’ shares took a battering yesterday after the department store group’s rise in sales this Christmas came at the expense of more promotions to lure cautious shoppers through its doors.

Chief executive Michael Sharp said it had been the toughest Christmas in his 40-year career and shot down comments made by Next’s chief Lord Wolfson that there had been less discounting on the high street this year.

“I think they (Next) need to get out a bit more,” he said.

“It’s quite plain that the market was more promotional than last year. All our major competitors were doing non-like-for-like promotional activity.”

Sharp said Debenhams ran two more days of sales than a year earlier, including a six day campaign called Christmas ‘Spectacular’ offering up to 25 per cent off every department and 10 per cent off beauty.

A step up in sales led Debenhams to halve its gross profit margin forecast from 0.2 per cent to 0.1 per cent, sending shares down 7.7 per cent.

Analysts also downgraded their full-year forecasts after Debenhams warned of one-off costs such as the revamp of its Oxford Street flagship store, which is estimated to knock around £2m off profits.

Nevertheless sales at stores open over a year rose five per cent in the five weeks to 5 January, with like-for-like sales up 2.9 per cent in the 18 weeks to 5 January. Online sales jumped 39 per cent.