Debenhams warns on profits amid '˜volatile' trading

Department store chain Debenhams has warned that 'volatile' conditions on the high street could hit its full-year profits.

Debenhams warned its profits could come in at the lower end of City forecasts. Picture: TSPL

In a trading update, the retailer said sales slumped in the 15 weeks to 17 June, amid unpredictable trading and a weaker clothing market. Like-for-like sales fell 0.9 per cent in the period, or 2.4 per cent on a constant currency basis.

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“We currently anticipate that 2017 profit before tax will be within the range of market expectations,” the company said.

“However, should current market volatility continue, the outcome could be towards the lower end of the current range.”

Former Amazon Fashion boss Sergio Bucher, who took over as Debenhams chief executive in October, is attempting a turnaround of the firm and the figures show he has made some headway.

Sales of beauty, accessories and food and drink helped to mitigate the impact of a weaker clothing market, the chain said, with food sales rising 5 per cent. Group like-for-like sales in the year to 17 June rose 1.8 per cent.

In April, Bucher revealed plans to close 11 warehouses and put up to ten stores under review, in a move affecting at least 220 jobs.

His turnaround will also see the group cull in-house brands and leave some international markets, while also shifting about 2,000 staff to customer-facing roles as part of a drive to lure shoppers back to its stores.

Bucher said today: “As industry data has confirmed, May was a tough month for retailers and we continue to see volatility in trading week to week.

“As a result we are focused on delivering cost control and self-help through our ‘Fix the Basics’ plan. We continue to build good foundations for longer-term growth.”

Inflation, which has soared since the Brexit vote, hit its highest level for nearly four years in May at 2.9 per cent, tightening the squeeze on consumer spending and hitting retail sales.

Julie Palmer, partner at Begbies Traynor, said: “With success on the high street so inextricably linked to consumer confidence, recent news of falling credit card borrowing in May, negative real wage growth and weaker retail sales volumes all suggest a tightening of shoppers’ purse strings.

“Unfortunately, with Debenhams reporting volatile trading in recent weeks, it looks like the retailer is feeling the sharp end of this.”