Department store giant Debenhams has issued a profit warning for 2018 as sales continue to struggle as it tackles an “exceptionally difficult” market.
Like-for-like sales at the retailer inched down by 1.7% for the 15 weeks to 16 June 2018, and by 2.1% for the 41-week period to the same date. Digital sales were up 16% for the 15 weeks and 11.5% for the 41 weeks.
However, blaming competitor discounting and weakness in key markets, Debenhams has revised down its profit forecasts for the full year. It now expects pre-tax profit to reach between £35m-£40m, with EBITDA between £160m-£165m. Previously it had anticipated profits before tax of £50.3m.
Debenhams CEO Sergio Bucher stressed that the UK market conditions have been “exceptionally difficult”, leading to the profit warning. He noted that the business was reducing capital expenditure and focusing on digital and product improvements to combat the difficulties faced by the retailer. As part of this, last month Debenhams announced the appointment of Charlotte Burrows, formerly of Estée Lauder, as digital director.
“We don’t see 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,” said Bucher.
“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.”
Debenhams also highlighted its beauty business as an area for growth, despite the market declining in the last quarter, as well as its aim to revamp the fashion product, spearheaded by a revitalised Designers at Debenhams collection. The in-store experience has also come under scrutiny, with new formats being trialled aiming to improve experience, and raise sales densities.