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Debenhams issues profit warning as trading falls "below plan"

Lauretta Roberts
19 June 2018

Department store Debenhams has revised down its profit expectations for the current financial year as trading in May and early June was below plan, and the retailer says it doesn't expect the challenging conditions on the high street to get any better soon.

In a trading update this morning the business said it had achieved a 1.7% growth in group like-for-like sales in the 15 weeks to 16 June (and a 2.1% growth in the 41 weeks to the same date). However this was against weak comparisons last year. Digital sales were up 16% in the 15-week period.

In light of the performance it has issued new, lower profit guidance and now expects pre-tax profit for FY2018 to be in the range of £35m-£40m, with EBITDA in the range £160-£165m. This compares with current market PBT [profit before tax] consensus of £50.3m, it said.

Debenhams said it continued to drive out costs as it pressed ahead with its turnaround strategy and said that its net debt would be in line with its previous guidance, at c.£320m, "retaining significant headroom on our £520m facilities".

It said the strong performance in digital was driven by its focus on the transition to mobile, but beauty which had been a strong performing category, had dropped off in the last quarter to due to competitive and highly promotional nature of the market.

Richard Quinn

Richard Quinn x Debenhams

Fashion was showing promising signs, it said, with strong full-price sell-through on lines such as Studio by Preen and its first capsule collection by designer Richard Quinn, which form part of its revitalised Designers at Debenhams programme.

CEO Sergio Bucher commented: "It is well-documented that these are exceptionally difficult times in UK retail, and our trading performance in this quarter reflects that. We don't see these conditions changing in the near future and, because it is our priority to maintain a robust balance sheet, we are making very careful choices about how we deploy capital.

"We see clear evidence of progress as our digital growth outperforms the market and customers respond positively to our product improvements and format trials. We have also put in place a leaner operational structure and made a number of important hires so that we are well-equipped to navigate the market turbulence."

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