Debenhams loses out to rivals as profit plunges almost 25pc

Harriet Green
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Debenhams has just announced a fall in half-year pre-tax profit of 24.5 per cent, to £85.2m.

The drop is in line with expectations, the high street store stressed, but shows the still challenging and competitive environment, particularly in the UK, with which it’s having to cope.

Chief executive Michael Sharp said the store’s taking “decisive action” to address issues, working on improving its multi-channel offering.

Debenhams issued a shock profit warning on new year’s eve, and has been struggling to keep pace with rivals who have also been using heavy discounting as a way to bring in shoppers.

Revenues climbed just two per cent to £1.3bn from a year earlier in the 26 weeks to 1 March, but earnings dropped 21.2 per cent to 5.6p per share.

Like-for-like sales rose 1.5 per cent in the period.

Debenhams said the disappointing results were driven by an especially difficult UK market. It’s identified three factors that impacted performance:

First, clothing sales were below expectations, largely as a result of sales targets based on a strong performance last year, exacerbated by a weaker market in September and October.

Secondly, the promotional environment was more intense than last year, particularly in December, which diluted the impact of our promotions.

Thirdly, convenience became a much more important driver of customer behaviour in the crucial pre-Christmas period than in previous years. This favoured retailers with better developed multi-channel models than Debenhams.

Michael Sharp, chief executive, said the brand remains strong, but when it comes to outlook, he still has some reservations about the strength of the UK's consumer recovery.

The interim dividend will stay at one pence per share, Debenhams said.

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