Gloom for Debenhams as sales slump

HOPES that Debenhams had rebounded from a dismal Christmas season are likely to be dashed this week when the department store chain is tipped to unveil a 4 per cent sales fall in the past seven weeks.

The retailer blamed its poor performance over the festive season on the Arctic weather but retailers fear little progress has been made since, as a number of high street stalwarts begin to the feel the pinch of another consumer slowdown.

Debenhams is expected to unveil a 2 per cent fall in like-for-like annual sales when it presents full-year figures on Tuesday. Earlier it warned that the heavy snow before Christmas had cost it up to 3 per cent in sales in the 19 weeks to 8 January but analysts are poised for a further 4 per cent like-for-like sales slump in the past month and a half.

The results will add to an increasingly worrying picture on the high street after Argos-owner Home Retail Group last week sounded the alarm over a major consumer slowdown over the next 12 months.

Debenhams' strategy will come under focus as City watchers question its decision to heavily promote upmarket designer collections from the likes of Henry Holland and Ben de Lisi while pushing sale activity. Nick Bubb, retail analyst at Arden Partners, said the firm's strategy was "risky". "Our concern remains that the move into more upmarket ranges is incompatible with the constant focus of the business on discounting and sale activity," he said.

However fashion rival French Connection will tell a different tale with expectations that annual profits are likely to have more than quadrupled, thanks to a strong performance in its wholesale outlets and licensing.

The firm signalled last month that its profits would be higher than previously forecast despite the tough conditions on the high street.

Annual pre-tax profits are likely to hit at least 6.8m in the 12 months to 31 January, compared to 1.6m the previous year and well ahead of previous estimates of between 2.6m and 5.1m.

But the surge in profits is largely due to its strong performance in its wholesale outlets and licensing, while its own stores, which account for about 55 per cent of revenues, are expected to show softer sales. Andrew Wade, analyst at Numis, said: "The outperformance was helped by strength in licensing income. French Connection also made considerable progress in wholesale."