By Paul Sandle
LONDON (Reuters) - Debenhams (L:DEB) said Britons were spending their cash on holidays and cars rather than clothes after the retailer reported a fall in third-quarter like-for-like sales that sent its shares down as much as 6 percent.
Outgoing chief executive Michael Sharp said the market had "undoubtedly been tough" after Debenhams reported a 0.2 percent fall in sales at stores open more than a year. Stripping out the currency impact gave a worse-than-expected 1.6 percent drop.
"More spend is clearly going into things like holidays and people buying new cars, so we've got that as a backdrop," he told reporters on Wednesday.
"And clearly, although it is impossible to tell how significant, the uncertainty as a result of the referendum has added to the whole unpredictability."
British new cars sales hit a record high in 2015 and they have continued to rise, with new car registrations up 4.1 percent in the first five months of the year.
Sharp said Debenhams had a very strong season for swimwear and luggage, for shoppers going on holiday, but other seasonal clothing sales, especially for women, had been poor.
However, he said Debenhams, second to John Lewis (JLP.UL) by annual revenue, had the right strategy in place to counter changing shopping habits and he still expected profit for the year to be within the range of market forecasts.
SHARES SLIDE
Shares in the department stores group fell as much as 6 percent to 69.6 pence before recovering slightly. Analysts at Citi said the market consensus for profit was likely to come down by 2-3 percent following the update.
Analysts on average had expected pretax profit of 119 million pounds, according to Reuters data.
Associated British Foods (L:ABF), the owner of Primark, and other rivals Marks & Spencer (L:MKS) and Next (L:NXT) were dragged lower by Debenhams' update, falling by 3.2 percent, 1.2 percent and 0.7 percent respectively.
BHS, another familiar fascia on UK high streets, is being wound down, administrators said earlier this month.
The update for the 15 weeks to June 11 was the last under Sharp, who steps down on Friday after five years. Last month, Amazon (O:AMZN) executive Sergio Bucher was named as his replacement
Under Sharp's leadership, Debenhams built its non-clothing categories, such as beauty, and reduced its reliance on discounting. It also added concessions in under-used store space, built up its online service and expanded abroad.
New arrivals would include Claire's Accessories in 15 stores, he said, and more restaurants to serve growing demand for eating out while shopping.
There had been some targeted discounting in areas such as women's clothing in response in market conditions, he said, but not at a higher level than a year ago.
However, the company said its gross margin was now expected to be to flat versus a previous forecast of flat to up 0.5 percentage points.