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Department StoresEconomyHigh Street

Debenhams issues profit warning

Debenhams has issued a warning saying it now expects pre-profits to be “in the range of £35m-£40m” significantly lower than City forecasts of £50m.

The company blamed poor conditions on the high street and said that it doesn’t expect improvement anytime soon.

The warning is Debenhams third of the year after it released one in January following a disappointing Christmas, and in April announced first-half profits had dropped by 85% to £13.5m.

There was like for like sales growth of 1.7% in the 15 weeks to 16 June and saw a 16% rise in digital sales, but financial woes at the chain have led to plans to reduce the size of at least 30 stores and an initiative to lease store space to restaurant chains.

The company confirmed that a plan to make £20m in cost savings is on track and said the “new structure unlocks further opportunities to right-size our cost base”.

Sergio Butcher, CEO at Debenhams, said: “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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