Debenhams expects lower-than-expected profit

Debenhams has warned that the half-year profits will be most likely lower than expected

13:58 05 March 2013

Investors were spooked when Debenhams announced that they are expecting lower profits compared last year. For this reason, shares of the company have slumped by 10per cent in morning trading. 

 

Britain’s second-largest department store expects that the pre-tax profits for the 26 weeks to March 2ndwill most likely to drop by 4per cent year-on-year to around £120million; much lower compared to what analysts forecasted (£130million). 

Like-for-like sales on the other hand, increased by 3per cent year-on-year. However, the firm recorded 10per cent sales fall from January 14th to 27thdue to the bad weather and heavy snowfall. 

 

Debenhams issued statement explaining what happened. It reads as: “To recover sales lost due to snow, we introduced additional promotional events in February focused on 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."

 

“Further, the sales generated were mainly in lower margin clearance lines, which means that gross margin for the first half will be [about] 20 basis points lower than last year. 

 

“Therefore, gross margin for the year is now more likely to be flat than the 10 basis points increase previously guided to.”