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Debenhams shares crash on profits warning Debenhams shares crash on profits warning
(35 minutes later)
Shares in Debenhams tumbled 12% as it hit the market with a surprise profits warning, blaming the snow that blanketed Britain in the latter half of January. Shares in Debenhams tumbled 12% as it issued a surprise profits warning, blaming the snow that blanketed Britain in January.
The company said like-for-like sales dropped 10% between 14 and 27 January when "the UK business was severely disrupted by the snow which fell across the country". Its shares dropped to 85p in early trading.The company said like-for-like sales dropped 10% between 14 and 27 January when "the UK business was severely disrupted by the snow which fell across the country". Its shares dropped to 85p in early trading.
This may be the first of a series of bad results from retailers hit by the snow. Debenhams pointed to data from accountants BDO, which showed like-for-like sales across the fashion retailers dropped by an average of 10.5% over the two-week period. This may be the first of a series of bad results from retailers hit by the snow. Debenhams pointed to data from accountants BDO, which showed like-for-like sales across fashion retailers dropped by an average of 10.5% over the two-week period.
Debenhams, which is Britain's second-largest department store chain, launched sales for Valentine's Day, half-term and end of the month to try to make up for the dire performance, but said in a statement: "Although these events did drive some incremental sales they did not fully recover those lost in January."Debenhams, which is Britain's second-largest department store chain, launched sales for Valentine's Day, half-term and end of the month to try to make up for the dire performance, but said in a statement: "Although these events did drive some incremental sales they did not fully recover those lost in January."
As a result, it expects pre-tax profits for the first half to come in at £120m, rather than the £130m analysts had pencilled in, and more than 5% lower than the first half last year. Like-for-like sales for the six months to March 2 rose by 3%. As a result, it expects pre-tax profits for the first half to come in at £120m, rather than the £130m analysts had pencilled in, and more than 5% lower than the first half last year. Like-for-like sales for the six months to 2 March rose by 3%.
Debenhams said the products it did manage to shift were in "lower margin clearance lines", meaning gross margin for the first half with be around 0.2% lower than in the same period last year, and would be flat for the full year, rather than rising by 0.1%. Debenhams said the products it did manage to shift were in "lower margin clearance lines", meaning gross margin for the first half will be about 0.2% lower than in the same period last year, and would be flat for the full year, rather than rising by 0.1%.
That will worry analysts who said Debenhams led the aggressive sales over Christmas, sacrificing profits in order to shift stock. Kate Calvert of Seymour Pierce said at the time: "[Debenhams] have got a bit too hooked on the promotional drug."That will worry analysts who said Debenhams led the aggressive sales over Christmas, sacrificing profits in order to shift stock. Kate Calvert of Seymour Pierce said at the time: "[Debenhams] have got a bit too hooked on the promotional drug."
Debenhams chief executive Michael Sharp said on Monday: "Whilst 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." The company will publish its first half results on 18 April. Michael Sharp, the Debenhams chief executive, said on Monday: "Whilst 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." The company will publish its first half results on 18 April.