Debenhams’ profit before tax nosedived 84.6% year on year in its first half, to £13.5m, amid a “challenging UK market background”, as its CFO Matt Smith departs.
Group EBITDA fell 30.6% for the 26 weeks to 3 March, to £103.5m.
Sales also dipped at the embattled department store group in the half - group gross transaction value fell 1.6% to £1.7bn, while like-for-like sales fell 2.2%. The retailer said the final week of trading to 3 March was disrupted by “extreme weather conditions” which saw 100 stores temporarily closing. It attributes 1% of the like-for-like sales drop to this.
The business said a “disappointing Christmas season” saw an increase in competitor discounting, which led to higher clearance from the retailer of seasonal stock and a group gross margin decline of 160 bps.
Digital sales were up 9.7%, however, driven by strong growth in mobile and improved conversion rates.
The figures come as Debenhams also announced this morning that its CFO Matt Smith is leaving the business to take up the position of finance director at Selfridges. A search has begun for his successor.
Debenhams added that it saw “encouraging results” from new store format trials, and plans to roll this out to 35% of its UK store sales base.
The group said it expects full-year profit before tax to be at the lower end of the current range of broker forecasts of £50m to £61m.
Debenhams said it is focusing on five priority actions to mitigate fast-changing market conditions and drive progress in the full year. These are:
- Delivering above-market digital sales growth driven by technological change focused on mobile
- Sustaining leadership in beauty through innovative customer engagement both in-store and online
- Revitalising fashion product under new leadership, with the Designers at Debenhams refresh under way
- Changing in-store experience for customers both through redesigned service model and store presentation
- Accelerating cost-reduction activity to underpin additional annualised savings of £20m identified in January 2018
Sergio Bucher, CEO, said: “The UK retail environment is undergoing profound change, and with the help of some important new senior hires, we are moving faster and working harder than ever to ensure Debenhams is well-placed to outperform in this new retail world. We expect no help from the external environment, so we are focused on delivering our Debenhams Redesigned strategy, aiming to mitigate difficult trading conditions through self-help initiatives.
“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. We are holding share in a difficult fashion market, and in other categories such as furniture, exciting new partnerships have the potential to transform our offer. We approach the remainder of the year mindful of the very challenging market conditions, but with confidence that we have a strong team and the right plan to navigate them and return Debenhams to profitable growth.”