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Debenhams downgrades profit guidance after “severe disruption” by snow

Debenhams has been “severely disrupted” by heavy snowfall earlier this year, dampening overall growth in the first half of its financial year.

Like-for-like sales grew by around 3% over the 26 weeks to March 2, with the snowy fortnight of January 14-27 seeing sales fall by 10%.   

In a trading update released today, the department store said it was expecting to report a year-on-year drop in gross margins of 20 basis points as a result of the bad weather and its subsequent efforts to drive sales through discounting.

Pre-tax profits are now expected to be around £120m for the first half, a drop of around £10m from previous analyst predictions.

Debenhams said it had introduced “additional promotional events in February” to drive sales over Valentine’s Day, half-term and the month end.

“Although these events did drive some incremental sales they did not fully recover those lost in January,” the business said. “Gross margin for the year is now more likely to be flat than the 10 basis points increase previously guided to.”

However, the business expects to make up lost ground in the second half of the year, highlighting a “strong” spring 13 collection and stocks at planned levels. As a result, Debenhams is not changing its full year guidance.

Chief executive Michael Sharp said: “While the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered.

“We are confident in our spring/summer ranges and that we can grow sales in the second half. Our strategy to build a leading international, multi-channel brand remains on track and we continue to focus on the four pillars of the strategy and investing in our business for long-term, sustainable growth.”

Debenhams will report its results for the 26 weeks to 2 March 2013 on 18 April 2013.

Readers' comments (1)

  • While snow was a big factor for many retailers including Debenhams, this is only half the story. The excessive discounting that Debenhams does in increasingly dragging their profits down. The things is, they don't need to discount to the extent that they do, but their management are too blind to see it. What will a Debenhams store look like in ten years time? That is not a pleasant thought.

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