Debenhams disappoints with 3.4% drop in like-for-likes

// Christmas like-for-likes down 3.4%, underpinned by UK decline of 3.6%
// Like-for-likes for 18-week period down 5.7%, driven by UK decline of 6.2%
// Debenhams still on track to meet profit targets in line with market expectations

Debenhams has attributed the challenging market for the dent in sales it recorded over Christmas, but insisted it was on track to meet full-year profits targets.

For the six-week period ending January 5, the department store retailer recorded a 3.4 per cent drop in like-for-like sales, while group gross transactional value fell by 3.8 per cent.

This compares to like-for-like and group gross transactional value growth of 2.9 per cent and 3.6 per cent respectively during the same Christmas trading period the year prior.

In the UK, Debenhams said UK like-for-likes for the 2018 Christmas period declined by 3.6 per cent.

However, the department store said weak store footfall was offset by growth in digital, which grew six per cent across the company.

The retailer’s Christmas trading update also included figures covering the 18 week period ending January 5.

It recorded a 5.7 per cent drop in like-for-like sales and a 5.6 per cent drop in group gross transaction value.

This was driven by a 6.2 per cent plunge in UK sales while its international arm declined 3.5 per cent.

However, Debenhams hailed the 4.6 per cent growth on digital sales across the period.

Despite the results, which the retailer attributed to the tough market backdrop – particularly at home in the UK – Debenhams said it was currently on track to deliver current year profits in line with market expectations.

“We responded to a significant increase in promotional activity in the market, particularly in key seasonal categories, in order to remain competitive for our customers,” chief executive Sergio Bucher said.

“In order to ensure that Debenhams has a sustainable and profitable future we need a strong customer proposition, a strengthened balance sheet and a reshaped store portfolio.

“We have a robust plan to deliver this and while there is much work still to do, the performance of our Redesigned stores over peak, and continued outperformance in
digital, reinforce our view that we are taking the right steps to protect the future of the business.”

Debenhams’ Christmas trading update is the first since revealed its end of financial year figures in October.

The figures included reported loss before tax of £491 million – a record in the retailer’s 240-year history and a massive drop compared to the £59 million profit it recorded the previous financial year.

The loss came about after £512.4 million worth of write downs relating to store and lease provisions, IT costs, and impairment charges.

Like-for-like sales across the year also fell 2.3 per cent year-on-year, while EBITDA fell 27.5 per cent year-on-year to £157.5 million.

Operating profit fared worse, nose diving 59.6 per cent to £43.4 million, and underlying profit before tax plummeted 65.1 per cent year-on-year to £33.2 million.

The beleaguered department store announced at the time that it would close up to 50 underperforming stores out of its 166-strong portfolio in the next three to five years.

This could lead to the loss of around 4000 jobs, although this has not yet been confirmed.

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