Yahoo Finance Debenhams warns of market volatility as sales fall
Debenhams has told investors to brace for profits to be at the lower end of expectations if volatility continues to afflict the retail market.
Boss Sergio Bucher, who joined from Amazon this year to lead a revamp of the struggling department store chain, said the market had become “more volatile and more unpredictable”.
Mr Bucher said Debenhams had already witnessed “some customers being more cautious about their discretionary spending as there has been a lot of news about inflation on food and fuel”. “We have seen some good weeks and some less good weeks,” the chief executive added.
The cautious tone sent Debenhams shares down by 2.2pc to 43½p yesterday and dragged rival bricks and mortar retailers Marks & Spencer and Next lower. The department store chain reported a 1pc fall in total sales while like-for-like sales dropped 0.9pc in the 15 weeks to June 17.
The company has been focusing on improving its beauty halls to tap into a booming millennial make-up trend and introducing more cafes and restaurants as spending shifts from retail to leisure.
Debenhams said that food sales had risen by 5pc while its beauty and accessories business performed strongly.
However, around 50pc of sales still come from clothing, which has been a drag on the retailer as the wider fashion market suffers a slowdown and it has confessed that some of its own Designer at Debenhams fashion ranges are in need of a refresh. Recent figures from BDO revealed that fashion sales last month were down 3.6pc on last year.
There has been increasing nervousness around the health of the struggling high street as rising shop prices and slowing wage growth fuel concerns about an imminent spending slowdown.
The Confederation of British Industry (CBI) yesterday said that shops had a better June than economists expected, with 12pc of retailers reporting a sales increase. However, its monthly retail sales balance revealed that retailers are the most downbeat about the month ahead since September last year.
“There’s no getting away from the fact that life is getting tougher, with retailers clearly cautious over the near-term outlook,” said Anna Leach, the CBI’s head of economic intelligence.
Mr Bucher said the department store was focused “on what we can control rather than the distractions” and said he was “pleased” with the progress of his turnaround strategy. It had reworked its stocking systems to accelerate the time it took to replenish product on the shop floor and was working on ways to increase the amount of time shoppers browsed instore.
Earlier this year, Mr Bucher unveiled his plans to revive the chain by appealing to more mobile customers and making shopping “more sociable”. He also said that Debenhams would review the future of 10 shops over the next five years and shut 11 warehouses.
However, analysts and investors believe the retailer needs to be more radical with its store estate in an increasingly online world. Kate Calvert, analyst at Investec, said: “We see no silver bullet for Debenhams’ structural pressures and it is hard to see any real profit progression in the next three years.”
