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Beast from the East savages Debenhams as profits plunge 85%

Shoppers walk past Debenhams on Oxford Street in central London (REUTERS/Hannah McKay)

Debenhams has reported pre-tax profits have been all but wiped out, plunging 84% to just £13.5 million.

The struggling retailer put the blame on the freezing Beast from the East weather event that resulted in the chain having to close temporarily 100 stores.

Like-for-like sales fell by 2.2% in the 26 weeks to 3 March, with the cold weather blamed for about half that decline.

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It also warned profits for the full year would now be at the lower end of brokers’ forecasts of £50m to £61m, compared with £95.2m for the previous year.

To add to a disappointing morning, Debenhams also confirmed Matt Smith, its chief financial officer, is leaving after less than three years in the job for rival Selfridges where he will become finance director.

Debenhams blamed the impact of the Beast from the East on a slump in sales (Reuters/Peter Summers)

Sergio Bucher, Debenhams chief executive in 2016, said: “It has not been an easy first half, and the extreme weather in the final week of the half had a material impact on our results.

“But I am hugely encouraged by the progress we are making to transform Debenhams for our customers.”

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Debenhams, along with many other major high street retailers, has been struggling to get people through its doors with money to spend.

It issued a profits warning in the aftermath of a poor festive season.

Other factors such as high rents and rising business rates have also squeezed margins on the high street. Debenhams shares fell 10% on opening.

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Justin King, the former boss of Sainsbury’s, told BBC Radio 4’s Today programme that traditional bricks-and-mortar retailers were, in effect, subsidising online sellers.

He said: “The reality is business rates are a massive burden borne only by high street retailers so-called bricks and mortar retailers and yet the services that business rates pay for all retailers use.

“When Amazon deliver in that brown cardboard box and you throw in the bin, the dustmen pick it up, that is paid for by business rates.”