Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Debenhams says 'cautious' as under-pressure UK consumers hold back

Published 23/10/2014, 08:08
© Reuters General Views of Debenhams on Londons Oxford street on January 10th 2011.
DEB
-
WTB
-
FRAS
-
JLP
-

LONDON (Reuters) - Debenhams (L:DEB), Britain's No. 2 department store chain, posted a more than 20 percent drop in annual profit on Thursday and said it was "cautious" about the future, as the spending power of British consumers remains under pressure.

Debenhams results for the 12 months ending in August were hit by a disastrous start to the financial year, when warm autumn and winter weather dented sales in the run-up to last Christmas. It said on Thursday that its performance improved in the second half, helped by its strategy of cutting back on promotions and targeting more full-price sales.

"Whilst this has been a challenging year for Debenhams, the brand is strong and our improved second half performance gives us confidence that we are ready for the key Christmas period and can deliver sustainable growth over the longer term," Chief Executive Michael Sharp said in a statement.

Debenhams, which trails market leader John Lewis (JLP.UL) by annual sales, has endured a tough 12 months with its shares tumbling 44 percent after it issued its second profit warning in less than a year last December.

The company, which has 245 stores in 28 countries, on Thursday reported underlying pretax profit of 110.3 million pounds in the 12 months ended Aug. 30, in line with analysts' average forecast of 110 million pounds, according to Reuters data.

Looking to its new financial year, Debenhams forecast that it could boost profitability, growing its gross margin by 10 to 40 basis points, as it continues to cut back on promotions, focuses on making its online business more competitive and rearranges its shops.

Earlier this year the firm identified about 10 percent of space in its around 160 UK stores as "underperforming". Sporting goods retailer Sports Direct (L:SPD), which owns a small stake in Debenhams, and Whitbread- (L:WTB) owned coffee shop Costa are trialing concessions in Debenhams stores.

Debenhams said there were "encouraging" early signs from the trials.

© Reuters. General Views of Debenhams on Londons Oxford street on January 10th 2011.

Shares in Debenhams climbed 1.8 percent at the open on Thursday.

(Reporting by Sarah Young, Editing by Paul Sandle and Clara Ferreira Marques)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.